Question: Based on the information below can you help me answer these 6 questions please? 2 ) Complete the following two cost - volume - profit
Based on the information below can you help me answer these questions please?
Complete the following two costvolumeprofit analyses for the show illustrated in Exhibit the KFBS Allstars:
a How many tickets must Walnut Creek sell to break even? Hint: dont ignore
the possibility that the attendance of Comp ticket holders affects the concerts
profitability
i Do you think that it is likely that Walnut Creek will break even? Briefly
explain.
ii Given your estimated breakeven point in units, compute the Margin of
Safety MOS in units. Briefly comment on the MOS result
b How many tickets must Walnut Creek sell to earn $ operating income
after taxes, assuming a percent tax rate? Is it reasonable to assume this level
of operating income will be achieved? Briefly explain.
What should be the average ticket price for all ticket types combinedA through D for the KFBS concert if the fixedpay fee is $rather than $ and Walnut Creek expects to sell tickets and wants to earn $ operating income after percent in taxes? After you estimate the average ticket price for all ticket types combined which is $ for the situation depicted in Exhibit estimate the price for each type of seat ie in Exhibit : A$ B$C$ D$Hint: assume sales mix for A B C and D seats remains the same as the mix in the Flash Report Exhibit
Negotiating the talent fee for the KFBS Allstars is an important strategic decision
for Walnut Creek management. Perform the following two independent scenario
analyses regarding different talent fee arrangements. Then comment briefly on
what the results of your two scenario analyses suggest regarding whether Walnut
Creek is better off negotiating a fixedpay contract with performers or a per
capita contract with performers:
a What is the maximum fixed fee that Walnut Creek can pay KFBS Allstars if
Walnut Creek wants to earn $ operating income after percent tax and
still expects the show to have an average ticket price of $ Assume,
including the same percent comp tickets ie: mix as before the show
is expected to be a sellout.
b Independent of a what is the maximum per capita fee see p of the
case for the reference of the percent comp tickets at per capita shows that
Walnut Creek can pay the KFBS Allstars, whose concert is expected to be a
sellout, if the Pavilion wants to earn $ operating income after
percent tax from an average ticket price of $ per ticket?
Walnut Creek management examined the results of the scenarios examined in
requirement and subsequently held additional discussions with Walnut Creeks
marketing team. The biggest uncertainty for Walnut Creek concerns the number of
paying ticket patrons for lesser known performers. As a result, Walnut Creek
management believes that the two most likely contract structure scenarios it will
face when negotiating contracts with lesser known performers ie bands will be
as follows. The first structure is percapita in nature Alternative and would pay
the performer a fee of $ per paid ticket holder. The second structure is fixed in
nature Alternative and would pay the performer a flat fee of $
a Assuming the same other relevant information from the case, calculate the
indifference point for these two fee contract structures. Be sure to SHOW
YOUR CALCULATIONS. Briefly explain what this indifference point
means.
b What profit is earned by Walnut Creek at this indifference point? Be sure to
SHOW YOUR CALCULATIONS.
c Walnut Creeks marketing team estimates that it will be able to sell
tickets for the hot new bandThe Dont Suck. Explain which contract
structure Walnut Creek should pursue with The Dont Suck band negotiations
and WHY this particular structure is best for Walnut Creek.
What role does CVP analysis and operating leverage play in contract negotiations with different types of performers fixedfee or per capita
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