Starlight Theater stages a number of summer musicals at its theater in northern Ohio. Preliminary planning has just begun for the upcoming season, and Starlight has developed the following estimated data.
¹ Represent payments to production companies and are based on tickets sold.
²Costs directly associated with the entire run of each production for costumes, sets, and artist fees.
Starlight will also incur $565,000 of common fixed operating charges (administrative overhead, facility costs, and advertising) for the entire season, and is subject to a 30% income tax rate. These common charges are allocated based on total attendance for each production.
Required:
a. What is Starlight's product mix?
b. What is Starlight's package contribution margin?
c. If Starlight's schedule of musicals is held, as planned, how many patrons would have to attend for Starlight to break even during the summer season? How many tickets for each type of musical does it need to sell in order to break even?
d. What is Starlight Theater's current profit for the business?
e. What is Starlight Theater's current margin of safety in terms of revenue dollars?
f. Starlight Theater wants to make a profit of $1,500,000 for the season before taxes. How many patrons would have to attend now? What is the required revenue dollars of sales?
g. Now Starlight Theater wants this profit in after-tax dollars. How many patrons would have to attend now? What are the required revenue dollars of sales?

Question

Starlight Theater stages a number of summer musicals at its theater in northern Ohio. Preliminary planning has just begun for the upcoming season, and Starlight has developed the following estimated data.

¹ Represent payments to production companies and are based on tickets sold.
²Costs directly associated with the entire run of each production for costumes, sets, and artist fees.
Starlight will also incur $565,000 of common fixed operating charges (administrative overhead, facility costs, and advertising) for the entire season, and is subject to a 30% income tax rate. These common charges are allocated based on total attendance for each production.
Required:
a. What is Starlight's product mix?
b. What is Starlight's package contribution margin?
c. If Starlight's schedule of musicals is held, as planned, how many patrons would have to attend for Starlight to break even during the summer season? How many tickets for each type of musical does it need to sell in order to break even?
d. What is Starlight Theater's current profit for the business?
e. What is Starlight Theater's current margin of safety in terms of revenue dollars?
f. Starlight Theater wants to make a profit of $1,500,000 for the season before taxes. How many patrons would have to attend now? What is the required revenue dollars of sales?
g. Now Starlight Theater wants this profit in after-tax dollars. How many patrons would have to attend now? What are the required revenue dollars of sales?

Quizplus · Accepted Answer

The Answer of Starlight Theater stages a number of summer musicals at its theater in northern Ohio. Preliminary planning has just begun for the upcoming season, and Starlight has developed the following estimated data. ¹ Represent payments to production companies and are based on tickets sold. ²Costs directly associated with the entire run of each production for costumes, sets, and artist fees. Starlight will also incur $565,000 of common fixed operating charges (administrative overhead, facility costs, and advertising) for the entire season, and is subject to a 30% income tax rate. These common charges are allocated based on total attendance for each production. Required: a. What is Starlight's product mix? b. What is Starlight's package contribution margin? c. If Starlight's schedule of musicals is held, as planned, how many patrons would have to attend for Starlight to break even during the summer season? How many tickets for each type of musical does it need to sell in order to break even? d. What is Starlight Theater's current profit for the business? e. What is Starlight Theater's current margin of safety in terms of revenue dollars? f. Starlight Theater wants to make a profit of $1,500,000 for the season before taxes. How many patrons would have to attend now? What is the required revenue dollars of sales? g. Now Starlight Theater wants this profit in after-tax dollars. How many patrons would have to attend now? What are the required revenue dollars of sales?

Starlight Theater Stages a Number of Summer Musicals at Its