Break-even point in Dollars is fixed cost / contribution margin ratio

Since the variable is at 4% total revenue, the contribution margin ratio is 96% or .96

$51,000/ .96 = $53,125

Contributions from sponsors = $25,600

Amount from ticket sales for break-even = $27,525

Compute the break-even point in dollars of ticket sales assuming Adrian and Jonathan's assumptions are correct as given in the case. This requirement is to calculate break even in dollars. The amount you calculate will be from all sources of revenue including contributions from sponsors. The requirement is for ticket sales only. Contributions from sponsors is stated in the case as $25,600. As an example, let's say that using the break even formula you calculate break even in dollars as $60,000. This is not the answer for the requirement. You need the amount of ticket sales which would be the $60,000 less $25,600 or $34,400 in ticket sales. It is critical that you account for the contributions from the sponsors. The rest of the case deals with ticket sales revenue. If you don't calculate ticket sales correctly, all of the other case answers you get will be wrong.

Note: The case states that variable costs are 4% of total revenue. What must the contribution margin ratio be if variable costs are 4% of total revenue?

Section 2

Shelley has just learned you are calculating the break-even point in dollars of ticket sales. She is still convinced the Club can make a profit using the assumptions above (second bullet point above).

Calculate the dollars of ticket sales needed to earn a target profit of $6,000.

Calculate the dollars of ticket sales needed to earn a target profit of $12,000.

Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues calculated above (third bullet point above) to earn a $6,000 profit? Show calculations to support your answers.