A travelling production of Grease performs 120 shows each year. The average show sells 1,000 tickets at $65 per ticket. The show has a cast of 45, each earning an average of $320 per show. The cast is paid only after each show. The other variable expense is program printing expenses of $6 per guest. Annual fixed expenses total $802,800.
1. Compute revenue and variable expenses for each show.
2. Use the income statement equation approach to compute the number of shows needed annually to break even.
3. Use the shortcut unit contribution margin approach to compute the number of shows needed annually to earn a profit of $5,708,800. Is this goal realistic? Give your reason.
4. Prepare Grease’s contribution margin income statement for 120 shows each year. Report only two categories of expenses: variable and fixed.