Sheila and La Marr Davis, 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. La Marr 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. Sheila 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. Sales $800,000 Variable Costs Fixed Costs 600,000 Income Tax Rate 100,000 32% 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 an alternative and have hired your consulting group, known for its inventive business and accounting consulting work, to help them make some important business decisions.