American Cinema Theatre Alternative - Discount Theatre Facing stiff competition from the movie megaplexes, American Cinema Theatre (ACT) is considering becoming a discount theatre. This means ACT would show second-run movies; these are films that have previously been shown at first- run theatres. ACT would have to charge a lower ticket price for second-run movies but La Marr and Sheila believe that the lower ticket price will increase their customer base -allowing teenagers, senior citizens, and large families to attend their theatre. Also, acquiring second-run movies is considerably less expensive then acquiring first-run movies which will decrease ACT's variable costs. The financial information is presented below, assuming 80,000 tickets are sold using the regular scenario and 100,000 tickets are sold under the discount theatre scenario due to the greater number of customers. Tickets Sales Variable Costs Fixed Costs Income Tax Rate Regular Discount 80,000 100,000 $800,000 $700,000 600,000 420,000 100,000 140,000 32% 32% 5.) Assume that the company expects ticket sales to decline by 20% next year. There will be no change in ticket price. Prepare forecasted financial results for next year following the format of the contribution margin income statement as shown above with columns for each of the two theatre types