Hollywood Stars, Inc., owns and operates a nationwide chain of movie theaters. T he chain’s 450 properties vary from low- volume, small- town, single- screen theaters to high- volume, urban, multiscreen theaters. The firm’s management is considering installing popcorn machines, which would allow the theaters to sell freshly popped corn rather than prepopped corn. The fresh popcorn will be sold for $ 3.50 per tub. The annual rental costs and the operating costs vary with the size of the popcorn machines. The machine capacities and costs are shown below. (Ignore income taxes.)

Required: 

1. Calculate a theater’s break- even sales volume (measured in tubs of popcorn) for each model of popcorn popper.

2. Prepare a profit- volume graph for one theater’s popcorn sales, assuming that the Giant Popper is purchased.

3. Calculate the volume (in tubs) at which the Standard Popper and the Super Popper earn the same profit or loss in each movie theater.

(CMA, adapted)

Transcribed Image Text:

Popper Model Standard Super Giant Annual capacity Costs: 40,000 tubs 80,000 tubs 120,000 tubs Annual machine rental Popcom cost per tub. Other costs per tub Cost of each tub... $16,000.00 .26 2.44 16 $22,000.00 .26 2.28 .16 $40,000.00 .26 2.10 16