British Productions performs London shows. The average show sells 1,200 tickets at $50 per ticket. There are 120 shows a year. The average show has a cast of 70, each earning an average of $300 per show. The cast is paid after each show. The other variable cost is a program-printing cost of $7 per guest. Annual fixed costs total $459,000. Use the contribution margin approach to compute the number of shows needed each year to earn a profit of $3,825,000. Is this profit goal realistic? Explain.
Target Profit is a profit that the management wants to earn in the next accounting period. These is also used to draw a cost plans and to help prepare in cases where financing is needed.
Answer and Explanation: 1
The answer is The profit goal is not realistic because the company should sell a 168,000 tickets but the total estimated tickets to be sold is only...
See full answer below.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
fromChapter 3 / Lesson 5
Total costs are compared to total revenue and are either lower (profit), higher (loss), or equal (break-even point). Learn to calculate this and identify target profit, as well as establish a margin of safety to accommodate unanticipated risks.