Marge Porter is the manager of Stanfords traditional Sunday Flicks, sponsored by the Stanford Student Association. The
Question:
Marge Porter is the manager of Stanford’s traditional Sunday Flicks, sponsored by the Stanford Student Association. The admission price is deliberately set at a very low $3. Each Sunday, a film has two showings and a maximum of 500 tickets can be sold for each showing. The rental of the auditorium is $330 and labor is $435, including $90 for Porter. Porter must pay the film distributor a guarantee, ranging from $300 to $900, or 50% of gross admission receipts, whichever is higher.
Before and during the show, she sells refreshments; these sales average 12% of gross admission receipts and yield a contribution margin of 40%.
1. On June 3, Porter screened The Descendants. The film grossed $2,250. The guarantee to the distributor was $750, or 50% of gross admission receipts, whichever is higher. What operating income was produced for the Student Association?
2. Recompute the results if the film grossed $1,400.
3. The “four-wall” concept is increasingly being adopted by movie producers. In this plan, the movie’s producer pays a guaranteed fixed rental to the theater owner for, say, a week’s showing of a movie and the producer receives the ticket receipts less the fixed rental. As a theater owner, how would you evaluate a “four-wall” offer?
Contribution MarginContribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
Introduction to Management Accounting
ISBN: 978-0133058789
16th edition
Authors: Charles Horngren, Gary Sundem, Jeff Schatzberg, Dave Burgsta