Van Morrison has invested $700,000 in a Concert Hall that seats 1,000 people. He knows that in the coming year, he will be able to mount 100 concerts, and is anticipating to sell 80% of the tickets. He would like to see a 10% after tax return on his investment this year.

Van faces a personal tax rate of 35%.

There are many costs involved in running a concert hall. Estimates include that variable costs will use up 45% of the revenue earned by the business.

Annual fixed costs would be as follows:

• • Salaries $250,000
  • Insurance $20,000
  • License $10,000
  • Utilities $30,000

Also, depreciation on the building itself would be 10% of the buildings $500,000 book value.

Part of Van's investment in the business came through a bank loan of $250,000, of which he will be paying 6% interest per year.

REQUIRED:

Based on the information provided, fill in the blanks.

1. A net income of $--------- must be earned to achieve the desired rate of return
2. A pretax profit of $--------- must be earned
3. The given fixed costs added up to $----------, while the undistributed costs requiring calculation add up to $----------. Added together, the total fixed and undistributed costs are $---------.
4. To earn the required net income, a Gross Profit of $---------- must be achieved.
5. Total revenue of $------------ must be achieved.
6. Total variable costs are $-----------
7. The average check of $--------- must be earned to achieve the desired rate of return.