Utah Metropolitan Ballet is located in Salt Lake City. The company is housed in the Capitol Theater, one of three buildings that make up the Bicentennial Arts Center in downtown Salt Lake City. The ballet company features five different ballets per year. For the upcoming season, the five ballets to be performed are The Dream, Petrushka, The Nutcracker, Sleeping Beauty, and Bugaku.
The president and general manager has tentatively scheduled the following number of performances for each ballet for the coming season:
Dream 5
Petrushka 5
Nutcracker 20
Sleeping Beauty 10
Bugaku 5
To produce each ballet, costs must be incurred for costumes, props, rehearsals, royalties, guest artist fees, choreography, salaries of production staff, music, and wardrobe. These costs are fixed for a particular ballet regardless of the number of performances. The direct fixed costs follow for each ballet.
Dream Petrushka Nutcracker Sleeping Beauty Bugaku
$275,500 $145,500 $70,500 $345,000 $155,500
Other fixed costs are incurred as follows:
|
Advertising
|
$ 80,000
|
|
Insurance
|
15,000
|
|
Administrative salaries
|
222,000
|
|
Office rental, phone, and so on
|
84,000
|
|
Total
|
$401,000
|
For each performance of each ballet, the following costs are also incurred:
|
Utah symphony
|
$3,800
|
|
Auditorium rental
|
700
|
|
Dancers' payroll
|
4,000
|
|
Total
|
$8,500
|
The auditorium in which the ballet is presented has 1,854 seats, which are clas- sified as A, B, and C. The best viewing ranges from A seats to C seats. Information concerning the different types of seat follows:
|
|
A Seats
|
B Seats
|
C Seats
|
|
Quantity
|
114
|
756
|
984
|
|
Price
|
$35
|
$25
|
$15
|
|
Percentage sold for each performance:*
|
|
|
|
|
Nutcracker
|
100
|
100
|
100
|
|
All others
|
100
|
80
|
75
|
*Based on experience, the same percentages are expected for the coming season.
Required
1. Compute the expected revenues from the performances that have been tentatively scheduled. Prepare a variable-costing income statement for each ballet.
2. Calculate the number of performances of each ballet required to produce the revenues needed to cover each ballet's direct fixed costs.
3. Calculate the number of performances of each ballet required for the company as a whole to break even. If you were the president and general manager, how would you alter the tentative schedule of performances?
4. Suppose that it is possible to offer a matinee of the popular Nutcracker. Seats would sell for $5 less than in the evening, and the rental of the auditorium would be $200 less. The president and general manager believes that five matinee performances are feasible and that 80 percent of each type of seat can be sold. What effect will the matinee have on the company's profitability? On the overall break-even point?
5. Suppose that no additional evening performances can be offered beyond those tentatively scheduled. Assume that the company will offer five matinee perfor- mances of The Nutcracker. Also, the company expects to receive $60,000 in govern- ment grants and contributions from supporters of the fine arts. Will the company break even? If not, what actions would you take to bring revenues in line with costs? Assume that no additional performances of The Nutcracker are feasible.