Gala Promotions Limited is planning a concert in Karachi. The following are the estimated costs of the
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Question:
Gala Promotions Limited is planning a concert in Karachi. The following are the estimated costs of the proposed concert:
Rs. (000)
Rent of premises 1,300
Advertising 1,000
Printing of tickets 250
Ticket sellers, security 400
Wages of Gala Promotions Limited Personnel employed at the concert 600
Fee of artist 1,000
There are no variable costs of staging the concert. The company is considering a selling price for tickets at either Rs.4,000/- or Rs.5,000/- each.
Required:
- Calculate the number of tickets that must be sold at each price in order to break even.
- Recalculate the number of tickets that must be sold at each price in order to break-even, if the artist agrees to change from the fixed fee of Rs. 1 million to a fee equal to 25% of the gross sales proceeds.
- Calculate the level of ticket sales for each price, at which the company would be indifferent as between the fixed and percentage fee alternative.
- Comment on the factors, which you think, the company might consider in choosing between the fixed fee and percentage fee alternative.
Related Book For
International Accounting
ISBN: 978-1260466539
5th edition
Authors: Timothy Doupnik, Mark Finn, Giorgio Gotti, Hector Perera
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