Question
CT-Symphony Orchestra The CT-Symphony Orchestra is a branch of the Center for Performing Arts. It performs regular concerts throughout the year and has been reasonably
CT-Symphony Orchestra
The CT-Symphony Orchestra is a branch of the Center for Performing Arts. It performs regular concerts throughout the year and has been reasonably profitable in the past. However, in recent years, concert attendance has been declining and the Orchestra is looking for ways to boost attendance.
The Orchestra is considering three types of concerts for the next season: a. Classical selections from Beethoven and Brahms
- More Mozarta selection from Mozarts music
- Contemporary Pop and Rock Selections
Table 1 contains the marketing departments projections of sales and revenue for each type of concert.
Since this is a new direction with no prior sales history, the director of the Orchestra, Sarah Bernhardt, is concerned about the certainty of ticket sales. She has asked the box office manager to provide some sense of how sure he is that 141,000 tickets can be sold. She wanted to know the range of ticket sales so she could assess the risk the Orchestra faces. The box office manager has provided the following additional information.
CT SYMPHONY CASE EXHIBITS
Table 1
CT SymphonyProposed Season
Concert Type | Average Ticket Price | Number of Nights | Tickets Sold | Variable Cost/Night |
Beethoven & Brahms | $35 | 30 | 30,000 | 25,000 |
Mozart | 30 | 30 | 45,000 | 27,500 |
Contemporary Pop | 20 | 30 | 66,000 | 30,000 |
Total |
| 90 | 141,000 |
|
Total Fixed Costs |
|
|
| $1,000,000 |
Table 2
CT SymphonyRange of Sales for Current Mix*
Ticket Sales | Probability of sales |
100,000 | 15.00% |
120,000 | 30.00% |
140000 | 40.00% |
160,000 | 15.00% |
| 100.00% |
Table 3
CT SymphonyAlternate Proposal
Concert Type | Average Ticket Price | Number of Nights | Tickets Sold | Variable Cost/Night |
Beethoven & Brahms | $35 | 20 | 20,000 | 25,000 |
Mozart | 30 | 30 | 45,000 | 27,500 |
Contemporary Pop | 20 | 40 | 88,000 | 30,000 |
Total |
| 90 | 153,000 |
|
Table 4
CT SymphonyRange of Sales for Alternate Proposal*
Ticket Sales | Probability of sales |
130,000 | 10.00% |
l50,000 | 20.00% |
170,000 | 35.00% |
190,000 | 30.00% |
210,000 | 5.00% |
*The probability distributions in Tables 2 and 4 represent a simplification. In a real situation, we would compute the probability distribution of sales for each type of concert; the sum of the expected sales for each concert would be the expected total ticket sales.
Required:
Prepare a memo to Sarah Bernhardt, the Director of CT Symphony, outlining your analysis, conclusions, and recommendations to help the company plan its coming season. Your memo must include an analysis of the issues stated in questions a-c (below) to address the business and strategic decisions outlined in questions d and e.
Required:
- For the coming summer season, only use data in Table 1. Calculate the breakeven point for ticket sales and the expected profit using average revenue per ticket and average cost per ticket. What is the safety margin? Do the analysis at the overall (total) ticket-levels
- Now consider the data in Table 2; compute the breakeven point for ticket sales and the expected profit using average revenue per ticket and average cost per ticket. What is the safety margin? [Hint: Calculate Expected Total Tickets Sales, given the probability distribution. Note, data in Table2 is at Total (Overall) ticket-levels]
- Assume that the box office manager would like to change the mix of concerts and has supplied you with the information shown in Tables 3 and 4. The cost information remains unchanged. Compute the breakeven point for ticket sales and expected profit using average revenue per ticket and average cost per ticket. What is the safety margin?
- Should the Orchestra adopt the alternate proposal? Explain your reasoning with facts and analysis.
- In your opinion, is the CT Symphony Orchestra pursuing the right strategy in terms of the location and mix of concerts? Explain your reasoning with reference to the key factors in the CT Symphony Orchestras environment.
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