So the first thing we need to do is to arrive at the wighted average of contribution margin.
To do so, we will have to allocate weights to the contribution margin per unit of all the three productions.
Weights should be assigned on the basis on tickets sold for each performance as it is mentioned that variable costs are based on the tickets sold.
So to do so we have to
multiply the '
Average attendance per performance' by the '
number of performances'.
For example
1) Mr Wonderful it will be
12 * 3,500 = 42,000 (Contribution margin per unit : 18 - 3 =
15 i.e., Price - Variable cost)
2) Thats Life
20 * 3,000 = 60,000 (Contribution margin per unit : 15 - 1 =
14 i.e., Price - Variable cost)
3) All That Jazz
12 * 4,000 = 48,000 (Contribution margin per unit : 20 - 0 =
20 i.e., Price - Variable cost)
So now we have
weights as
42+60+48 = 150
Further we have to multiply contribution margin per unit by its weight for each production
as,
Mr. Wonderful : (15*42)/150 =
4.2Thats Life : (14*60)/150 =
5.6All That Jazz : (20*48)/150 =
6.4
Total weighted average contribution margin = $16.2
Now as we have to get to the Break Even for attendees:
we have to simply apply the formula of breakeven : Fixed Cost / Contribution Margin/Unit (here, it will be weighted average contribution margin/unit)
Fixed costs are $
165,000 (Mr, Wonderful)
+ $
249,000 (Thats Life)
+ $
316,000 (All That Jazz)
+ $
565,000 (Common fixed operating costs) = $
1,295,000
Putting in formula of Breakeven it will be $
1,295,000 (Fixed costs)
/ $16.2 (Weighted avg. contribution margin per unit) =
79,938
*Note - this is as per my knowledge. It would be pleasure and helpful if anyone confirms this answer and if wrong please correct.Thanks
------------------------------
Ashvin Kulkarni
Accountant
Pune
India
------------------------------
Original Message:
Sent: 09-29-2020 11:19 AM
From: Rajesh Alexander
Subject: Part2 Section C
Hi Ashwin,
Unfortunately I don't have the answer.
Ca you explain your understanding with option C
Original Message:
Sent: 9/29/2020 10:10:00 AM
From: Ashvin Kulkarni
Subject: RE: Part2 Section C
Can you confirm is the answer is C. 79,938?
If yes I will try to explain as per my understanding
------------------------------
Ashvin Kulkarni
Accountant
Pune
India
Original Message:
Sent: 09-29-2020 05:11 AM
From: Rajesh Alexander
Subject: Part2 Section C
Can anyone please help me to find out the answer for the following Question with the concept ?