You are a concert promoter and represent today's major rock groups. The concerts you promote are held in large venues with a capacities of 50,000 to 70,000 fans. The average cost of a ticket to most of these concerts is $65.00.

As the promoter, you guarantee the band $900,000 per show. This arrangement transfers all of the risk to the promoter as to making a profit or incurring a loss. In addition to the $900,000 guaranteed the band, the promotor pays the venue in which the concert is performed 20% of the gross receipts on ticket sales to cover rent, on site security, ticket takers, parking lot attendants, and cleanup costs.

The promoter directly pays the cost of advertising, which runs an average of $250,000 per concert. In addition, the promoter pays the local city in which the venue is located about $2 per fan for traffic control in and about the venue. The promoter shares in the sales of T-shirts and memorabilia which averages about $8 per fan.

1. What is the break-even point of a concert in terms of sales dollars and number of fans attending?

2. In a 70,000 capacity venue, what is the maximum amount of profit the promoter can make?

3. If 50,000 fans attend a concert what is the margin of safety and margin of safety percentage?