The local authority of a small town maintains a theatre and arts center for the use of a local repertory company, other visiting groups, and exhibitions. Management decisions are

taken by a committee that meets regularly to review the financial statements and to plan the use of the facilities.

The theatre employs a full-time, non-performing staff and a number of artists at total costs of 9,600 and 35,200 a month, respectively.

The theatre mounts a new production every month for 20 performances. Other monthly costs of the theatre are as follows:

Particulars	Amount
Costumes	5,600
Scenery	3,300
Heat and light	10,300
A share of the administration costs of the local authority	16,000
Casual staff	3,520
Refreshments	2,360

On average the theatre is half full for the performances of the repertory company. The capacity and seat prices in the theatre are:

200 seats at 24 each

500 seats at 16 each

300 seats at 12 each

In addition, the theatre sells refreshments during the performances for 7,760 a month.

Program sales cover their costs, and advertising in the program generates 6,720 a month.

The management committee has been approached by a popular touring group, which would like to take over the theatre for one month (25 performances). The group is prepared to pay the local authority half of its ticket income as a fee for the use of the theatre. The group expects to fill the theatre for 10 nights and achieve two-thirds capacity on the remaining 15 nights. The prices charged are 2 less than normally applies in the theatre.

The local authority will, as normal, pay for heat and light costs and will still honor the contracts of all artists and pay the non-performing employees who will sell refreshments, programs, and so on. The committee does not expect any change in the level of refreshments or program sales if they agree to this booking.

Note: The committee includes the share of the local authority administration costs when making profit calculations. It assumes occupancy applies equally across all seat prices.

On financial grounds alone, should the management committee agree to the approach from the touring group? Support the answer with appropriate calculations and notes.