1 answer

How are variable costs calculated in requirement 4 on the income statement? (3,575,000) British Productions performs...

Question:

How are variable costs calculated in requirement 4 on the income statement? (3,575,000)
British Productions performs London shows. The average show sells 1,300 tickets at $60 per ticket. There year. No additional
Companies can use a contribution margin ratio approach to compute required sales in terms of sales dollars as follows: • (Fix
British Productions performs London shows. The average show sells 1,300 tickets at $60 per ticket. There year. No additional shows can be held as the theater is also used by other production companies. The avera cast of 65, each earning a net average of $340 per show. The cast is paid after each show. The other variable program-printing cost of $8 per guest. Annual fixed costs total $728,000 ticket. There are 110 shows per companies. The average show has a show. The other variable cost is a Read the requirements Requirement 1. Compute revenue and variable costs for each show. Use the following formula to compute sales revenue for each show. Net sales revenue per unit X Number of units sold = Sales revenue per show 60 1,300 = $ 78,000 Now compute the variable costs for each show. You will need to compute the variable costs per show for the cost of parame and the cost of performers separately, and then compute the total variable costs per show. Variable costs per unit X Number of units Variable costs per show Cost of programs $ 8 per program * 1,300 programs = $ 10,400 Cost of performers $ 340 per show * 65 performers S 22,100 Total variable costs 32,500 Requirement 2. Use the equation approach to compute the number of shows British Productions must perform each year to break even. Cost-volume-profit (CVP) analysis is a planning tool that looks at the relationship among costs and volume and how they affect profits (or losses). CVP analysis can be used to estimate the amount of sales needed to achieve a target profit. Target profit is the operating income that results when sales revenue minus variable and fixed costs equals management's profit goal Companies can use the equation approach to compute required sales in terms of units as follows: • Net sales revenue - Variable costs - Fixed costs Target profit A variation of this target profit calculation is the breakeven point calculation. The breakeven point is the sales level at which the company does not earn a profit or a loss, but has an operating income of zero. It is the point at which total revenues equal tota costs. Thus, when computing the breakeven point in units (shows), we will set the "Target profit amount to be so In Requirement 1, we computed the net sales revenue and the total variable costs per show. We are given the annuale costs for British Productions. If the company desires to break even, how many shows must British Productions per British Productions perform each year? Using the formula for the equation approach below, enter the fixed costs into the equation Net sales revenue Total variable costs Target per show - per show ) x Number of shows costs + prom $ 78,000 - $ 32,500 ) x Number of shows - $728,000 + $ 0 Fixed ide of the equation to compute the required Now use the rearranged formula, which isolates the number of shows to one side of the equation to number of shows to break even Fixed Net sales revenue Total variable costs Number of shows costs 1 per show per show ) to break even $ 728,000 1 $ 78,000 $ 32,500 Requirement 3. Use the contribution margin ratio approach to compute the number of shows of $5,687,500. Is this profit goal realistic? Give your reasoning Ber of shows needed each year to earn a profit https://xlitemprod.pearsoncmg.com/api/v1/print/accounting 11/8 2019
Companies can use a contribution margin ratio approach to compute required sales in terms of sales dollars as follows: • (Fixed costs +Target profit) / Contribution margin ratio = Required sales in dollars Before we can calculate the required sales in dollars for British Productions we need to calculate the contribution margin ratio Use the formula below to calculate this amount. You will need to calculate the contribution margin per show (Enter the contribution margin ratio as a percentage rounded to two decimal places XXX% Abbreviation used: CM = contribution margin.) 1000-30,500 CM per show ! Net sales revenue per show = CM ratio $ 45,500 $ 78,000 = 58.33 % CMN sasoriddech Next use the breakeven sales formula to estimate the amount of is needed to achieve a target profit of $5,587,500 (Round the required sales in dollars to the nearest whole dollar. Abbreviation used: CM = contribution margin.) ( Fixed costs – Target profit )! CM ratio Required sales in dollars ( $ 728,000 + $ 5,687,500 )/ 58.33 % = $ 10,998,628 Now divide the required sales in dollars computed in the previous step by the amount of sales revenue eamed per show (computed in Requirement 1) to determine the required number of shows needed each year to earn a profit of $5.687 500 (Round your answer up to the nearest whole number.) Required sales Sales revenue Required number in dollars I per show = of shows $ 10,998,628 1 $ 78,000 = 141 Is this profit goal realistic? Give your reasoning Since 141 shows is more than the maximum possible shows of 110, the profit goal of $5,687,500 is an unrealistic profit goal. Requirement 4. Prepare British Productions's contribution margin income statement for 110 shows performed in 2018. Report only two categories of costs: variable and fixed. A contribution margin income statement classifies cost by behavior, that is, costs are classified as either variable costs or feed costs. Using this format all variable costs (both manufacturing and selling and administrative) are subtracted from sales revenue for the period to arrive at the contribution margin. All foced costs (both manufacturing and selling and administrative) are then subtracted from the contribution margin to arrive at operating income for the period. Complete the contribution margin income statement now. Be sure to calculate the sales revenue and the variable costs for the number of shows to be performed in 2018 British Productions Contribution Margin Income Statement Year Ended December 31, 2018 Sales Revenue Variable costs Contribution Margin 5,005,000 728.000 Fixed Costs $4277.000 Operating Income (Loss) 6.680.000 13004cards X Blooper tenet Kid=858.00 3.575.000 1: Requirements

Answers

As in Requirement 1 Variable costs per show is calculated

Variable cost per unit * Number of units = Variable costs per show
Cost of programs $8 per program * 1300 program = $10400
Cost of performers $340 per show * 65 performers = 22100
Total variable cost $32500

Requirement 4

Shows performed in 2018= 110 shows

Variable costs per show= $32500

Variable costs= Variable costs per show*Shows performed

= $32500*110= $3575000

.

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