i dont understand how to do 6-11

Husband and wife, Bob and Trisha Johnson, decided to start their own business which would bring movies of all genres to their local community. Together they have started the American Cinema Theatre, or ACT. Bob is the "movie guy", having his degree in film studies and some script writing experience. He is responsible for determining and securing the films that ACT screens. Trisha manages the front and back office; selling the movie tickets, paying the employees, and running ads for the theatre. In its first year of operations the company sold 80,000 tickets and had the below sales and cost figures. The husband and wife team know that another challenging and competitive year lies ahead of them. Now entering their second year of operations, they are considering two alternatives and have hired your consulting group, known for its inventive business and accounting consulting work, to help them make some important business decisions. 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 firstrun theatres. ACT would have to charge a lower ticket price for second-run movies but Bob and Trisha 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. There will be an increase in the fixed costs of $30,000 for advertising to inform the public of this change. 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. 1.) Compute the company's contribution margin under both scenarios, if ACT decides to remain a regular theatre and if they decide to become a discount theatre. Compute the contribution margin both in total dollars and per unit. 2.) Compute the company's contribution margin ratio under both scenarios. (Note: Do not round the CMR for accurate calculations in the following questions). 3.) Compute the break-even point in sales dollars under each scenario. How many tickets will need to be sold under each situation to break-even? 4.) Compute the operating leverage under each scenario. What does this figure mean? Why is it important to management? Alternative I Requirements (continued) 5.) If the company wishes each scenario, regular theatre and discount theatre, to generate net income (after-tax) of $170,000, what is the amount of sales that needs to be generated? How many tickets will then need to be sold? Prepare a contribution margin statement for this step and verify that your after-tax net income in fact equals $170,000 for both the regular and discount theatre. 6.) 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 (assume a 32% tax rate, and that any loss before taxes yields a 32% tax savings). 7.) Assume that the company expects ticket sales to increase 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 (assume 32% tax rate, and that any loss before taxes yields a 32% tax savings). 8.) If sales greatly increase, which type of theatre (regular or discount) would experience a greater increase in profit? What if ticket sales declined -which theatre would experience a greater loss or reduction in income? Explain why. How does your calculation from (4) support your point? 9.) Thinking about movie ticket sales, is there any day of the week or time of day when greater sales are expected? Which theatre type is more sensitive to this occurrence? Which theatre type is less sensitive to this occurrence? Which theatre type is more advantageous and why? Is there anything else the company can do to manage the decline in sales that come with certain days and times? 10.) How do you recommend the company use the $30,000 advertising budget available under this scenario in order to achieve a maximum effect on their target audience? 11.) Compute the Profit Margin and Return on Assets for each scenario assuming average total assets of $2,000,000. Industry averages are 12% and 5% respectively