Please answer the following for this case:

1. Was Forrest Gump an accounting hit in terms of net income, as computed by Paramount?
   
   
2. In their original contracts, actor Tom Hanks and director Robert Zemeckis were to receive $7 million and $5 million, respectively, for their work on Forrest Gump. However, after the studio asked the producers for budget cuts, both Hanks and Zemeckis agreed to forego their standard fee for a percentage of the films gross box office receipts. Sources estimate that the new agreement guaranteed each of the two 8% of the studios share of gross box office receipts from the film. Using the information available about the costs of making the film, did Forrest Gump have a positive contribution margin? Assume that all costs not specifically identified as variable are fixed.
   
   
3. If Hanks and Zemeckis had demanded their original fees up front instead of taking a percentage of gross box office receipts, would Forrest Gump have made money in 1994?
   
   
4. Other individuals associated with the film signed contracts based on a percentage of net profits rather than gross box office receipts, net profits being the films profit after recouping of all the studios expenses. For example, Winston Groom, who wrote the novel on which the movie was based, received $350,000 plus 3% of the films net profits. Eric Roth, the screenwriter, signed a similar contract with a fixed fee plus 5% of the films net profits. Based on your calculations above, how much did these two individuals receive from their share of the films net profits?
   
   
5. How much in gross box office receipts will the studio have to receive from theaters before Groom and Roth receive any money under their net profit participation contract? (Again, assume that all costs not specifically identified as variable are fixed.)
   
   
6. Based on what you now know about contracts in the movie industry, which type of contract would a studio prefer actors, directors and others associated with a film to have? Why? Which type of contract would the actors, directors, and others prefer to have? Why?

Purganes Ner incloded in the $112 nitlion poofuction conts wet the following other expenser msocisted with the film. Frometige expecsei inourrted to blvertise, premiene, seroen, tranaport, and stost the filet totalad 567 Case mition it the end of 1994 . An additional 56.7 mallice "advertining overhed charge' (oqual to 10% of the 567 millisen peomotion eapetnes) was charged to the fim by Paranount, Mese charger represent the flen's ACCOUNTING IS LIKE A BOX OF CHOCOLATES: A I.FSSON IN COST BEHAVIOR Cheles E Darh ENTRODUCTON Ferreat Gamp was one of the begent movie hits of 1994 . The movil's fortunes contisued wo dimb in 1995, as it took honie Osars in six of the 13 cabefories in which it was nominated, including best pictuos, best gactafe cash flow as moch as $350 millon for Viacoen, Inc. Pacamount Ficture' pareat company. Such success has insured the film a place among the top grotsiag tiless of all times. This is quibe an acoomplabment for a movie that book nise years to mike it to the big crena and whoet icript Dut was Forrer Gew a monoy naker for Paranount in 1944 Firta gros box oflice receipes apsoscinasely 50/50 between the theater and the movie stadio, Under much an agreeseent, Faramoent had rockined $191 Paramoent sepects that the film eost 5112 nillien to prodace, includine approamately $15.3 million each paid to star Toen Hanks and disector Robert Zentecic, asd "prodsction evechead" of 514.6 miltion. This production overlead is darged to the movie at a rate equal to 15% \& other preduction essts. afocation of the studio"s eest of maintainits an intholase advertaing department. Paramount alno charged the fim a "diveribetion fee' of 32% of its ahase of grou bos office noceipes. Tais foe is the titrs's allocation of coila were charged te the flen by Paramouse