CVP, movie production. Royal Rumble Productions has just finished production of Feature Creatures, the latest movie directed by Tony Savage and starring Ralph Michaels and Sally Martel. The total production cost to Royal Rumble was $5 million. All the production people and actors on Feature Creatures received a fixed salary (included in the $5 million) and will have no "residual" (equity interest) in the revenues or operating income from the movie. Me- dia Productions will handle the marketing of Feature Creatures. Media agrees to invest a minimum $3 million of its own money in marketing the movie and will be paid 20% of the revenues Royal Rumble itself receives from the box-office receipts. Royal Rumble receives 62.5% of the total box-office receipts (out of which comes the 20% payment to Media Productions).

Required 1. What is the breakeven point to Royal Rumble for Feature Creatures expressed in terms of (a)

revenues received by Royal Rumble and

(b) total box-office receipts?

2. Assume in its first year of release, Feature Creatures has total box-office receipts of $300 million. What is the operating income to Royal Rumble from the movie in its first year?