2-48 Promotion of a Rock Concert BBT Productions, Ltd, is promoting a rock concert in London. The bands will receive a flat fee of 7 million in cash. The concert will be shown worldwide on closed-circuit television. BBT will collect 100% of the receipts and will return 30% to the individual local closed-circuit theater managers. BBT expects to sell 1.1 million seats at a net average price of 13 each. BBT will also receive 300,000 from the London arena (which has sold out its 19,500 seats, ranging from 150 for box seats to 20 for general admission, for a gross revenue of 1.25 million); BBT will not share the 300,000 with the local promoters. 1.The general manager of BBT Productions is trying to decide what amount to spend for advertising. What is the most BBT could spend and still break even on overall operations, assuming sales of 1.1 million tickets? 2. If BBT desires an operating income of 500,000, how many seats would it have to sell? Assume that the average price is 13 and the total fixed costs (including 2,000,000 in advertising) are 9 million. 2-57 Gross Margin and Contribution Margin Eastman Kodak Company is a provider of imaging technology products and services to the photographic, graphic communications, and health-care markets. A condensed 2008 income statement follows (in millions). Assume that $1,400 million of the cost of goods sold is a fixed cost representing depreciation and other production costs that do not change with the volume of production. In addition, $2,000 million of the other operating expenses is fixed. 1. Compute the total contribution margin for 2008 , and the contribution margin percentage. Explain why the contribution margin differs from the gross margin. 2. Suppose that sales for Eastman Kodak were predicted to increase by 10% in 2009 and the cost behavior was expected to continue in 2009 as it did in 2008. Compute the predicted operating income (loss) for 2009. 2-48 Promotion of a Rock Concert BBT Productions, Ltd, is promoting a rock concert in London. The bands will receive a flat fee of 7 million in cash. The concert will be shown worldwide on closed-circuit television. BBT will collect 100% of the receipts and will return 30% to the individual local closed-circuit theater managers. BBT expects to sell 1.1 million seats at a net average price of 13 each. BBT will also receive 300,000 from the London arena (which has sold out its 19,500 seats, ranging from 150 for box seats to 20 for general admission, for a gross revenue of 1.25 million); BBT will not share the 300,000 with the local promoters. 1.The general manager of BBT Productions is trying to decide what amount to spend for advertising. What is the most BBT could spend and still break even on overall operations, assuming sales of 1.1 million tickets? 2. If BBT desires an operating income of 500,000, how many seats would it have to sell? Assume that the average price is 13 and the total fixed costs (including 2,000,000 in advertising) are 9 million