The Garden Club is preparing for its annual meeting in which a magic show will be shown to its contributing members only. Last year, out of 1,500 members, only 600 contributed for the magic show. Tickets for the show were $30 per attendee. The profit report for last year’s show follows.

This year, the club committee does not want to lose money on the magic show due to poor attendance and to achieve this goal, the committee analyzed last year’s costs. It found that of the $20,000 cost of the magic show, 40% was fixed costs and the remaining 60% was variable costs. Of the $1,800 cost of printing, invitations, and paperwork, 50% was fixed and 50% variable.

Required

1. Prepare last year’s profit report using the contribution margin format.

2. The club committee is considering expanding this year’s magic show invitation list to include volunteer members (in addition to its contributing members). If the club committee expands the magic show invitation list, it expects an 80% increase in attendance. Calculate the effect this will have on the profitability of the show assuming that fixed costs will be the same as last year.

Transcribed Image Text:

Ticket sales Cost of magic show Gross margin Printing, invitations, and paperwork Profit (loss) $18,000 20,000 (2,000) 1,800 $ (3,800)