Neal Ltd have a cinema chain, based in Oxford, currently comprising of three cinemas in the towns of Derby, Norwich and Crawley. It has prepared budgets for the coming year based upon a ticket price of 4.

	Derby	Norwich	Crawley	Total
Budgeted ticket receipts	1,600,000	1,200,000	800,000	3,600,000
Costs:
Film Hire	500,000	400,000	390,000	1,290,000
Wages and Salaries	300,000	250,000	160,000	710,000
Overheads	500,000	400,000	350,000	1,250,000
	1,300,000	1,050,000	900,000	3,250,000

Included in the overhead figures are the Oxford Head Office fixed costs that amount to 720,000, these have been allocated to each cinema on the basis of budgeted ticket receipts. All other costs are variable.

The management are concerned about the Crawley cinema and the fact that it is showing a budgeted loss and is considering closing the cinema and selling the site to a Property Developer.

Required:

1. Prepare marginal costing statements to show contributions for each cinema and contribution and profit for the overall chain on the basis of:

1. The original budget

1. If the Crawley cinema is closed.

2. On the grounds of profitability do you think that the Crawley cinema should be closed? Give a reasoned explanation of your decision.
3. What is the contribution per ticket sale at each cinema?
4. If the Crawley cinema is kept open, Neal plc want an increase in profitability. One suggestion is that receipts at the cinema can be increased by 50% by an advertising campaign directed at Crawley that will add 40,000 to the chains fixed costs.