Madrigal Theater Company is interested in estimating fixed and variable costs. The following data are available for the month of December.
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Author royalties/fees are fixed because the theater pays for the right to put on the play; royalties and fees are not paid based on the number of tickets sold.
Required:
a. Use account analysis to estimate fixed cost per month and variable costs per dollar of sales [i.e., estimate a and b in the equation Cost = a + (b x Sales)].
b. Assume that the selling price per ticket is $25.Based on your answer to part a, what is your estimate of the contribution margin ratio at Madrigal Theater?