A travelling production of The Phantom of the Operaperforms 100 shows each year. The average show sells 800 tickets at $50 a ticket. The show has a cast of 40, each earning an average of $260 per show. The cast is paid only after each show. The other variable expense is program printing costs of $6 per guest. Annual fixed expenses total $942,400.
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 $1,438,400. Is this goal realistic? Give your reason.
4. Prepare The Phantom of the Opera’s contribution margin income statement for 100 shows each year. Report only two categories of expenses: variable and fixed.