(Questions A, B and C below are independent) (A) DJCAD has organised a theatrical exhibition for emerging artists. There fixed cost is 15,000 and they expect to sell 2000 tickets with the unit selling price of 15 per ticket. Lunch will be provided to the attendees with the variable cost of 7 per attendee. Required: i. Calculate the break-even point. ii. How many tickets must be sold to earn 10,000 profit? iii. Calculate the profit-volume ratio. (Marks 9) (B) (Drury 2018, p.57) According to an article published in the Financial Times the chief executive of The Guardian newspaper group and the paper's editor stated in a memo to staff that the publisher has 'made progress' and 'successfully' met its first year's objective of reducing losses as part of a three-year plan to break even. However, the memo warned that 'our operating costs remain too high, trading conditions remain tough and further changes and cost savings will be necessary if we are to meet our target of breaking even at an operating level by 2018/19.' The article reported that The Guardian has been hit by declining print revenue and a digital advertising market value where most revenues flow to Google and Facebook. This has prompted the Guardian Media Group, the parent company of the Guardian and Observer print and digital businesses, to reduce their print operations, shed jobs, move the newspaper from their Berliner formats to tabloid editions and to also outsource printing to Trinity Mirror. Required: i. Is break-even a good performance monitor over the longer term? ii. How do decreasing margins effect the break-even point and margin of safety? (B) (Drury 2018, p.57) According to an article published in the Financial Times the chief executive of The Guardian newspaper group and the paper's editor stated in a memo to staff that the publisher has 'made progress' and 'successfully' met its first year's objective of reducing losses as part of a three-year plan to break even. However, the memo warned that 'our operating costs remain too high, trading conditions remain tough and further changes and cost savings will be necessary if we are to meet our target of breaking even at an operating level by 2018/19.' The article reported that The Guardian has been hit by declining print revenue and a digital advertising market value where most revenues flow to Google and Facebook. This has prompted the Guardian Media Group, the parent company of the Guardian and Observer print and digital businesses, to reduce their print operations, shed jobs, move the newspaper from their Berliner formats to tabloid editions and to also outsource printing to Trinity Mirror. Required: i. Is break-even a good performance monitor over the longer term? ii. How do decreasing margins effect the break-even point and margin of safety
