Fave Motion Pictures sells movie tickets for $14 per movie patron. Variable costs are $4.50 per movie patron and fixed costs are $52,000 per month. The company's relevant range extends to 33,000 movie patrons per month. What is Fave Motion Pictures' projected operating income if 20,000 movie patrons see movies during a month?

Question

Quizplus · Accepted Answer

First, we need to calculate the total revenue:
Total Revenue = Number of movie patrons * Price per ticket
Total Revenue = 20,000 * $14
Total Revenue = $280,000

Next, we need to calculate the total variable cost:
Total Variable Cost = Number of movie patrons * Variable cost per patron
Total Variable Cost = 20,000 * $4.50
Total Variable Cost = $90,000

Now, we can calculate the total contribution margin:
Contribution Margin = Total Revenue - Total Variable Cost
Contribution Margin = $280,000 - $90,000
Contribution Margin = $190,000

Finally, we can calculate the operating income:
Operating Income = Contribution Margin - Fixed Costs
Operating Income = $190,000 - $52,000
Operating Income = $138,000

Therefore, the answer is B) $138,000.

Fave Motion Pictures Sells Movie Tickets for $14 Per Movie