Question Two McGee Enterprises operates in the leisure and entertainment industry and one of its...
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Question Two McGee Enterprises operates in the leisure and entertainment industry and one of its activities is to promote concerts at locations throughout the world. The company is examining the viability of a concert in Singapore. Estimated fixed costs are $60 000. These include the fees paid to performers, the hire of the venue and advertising costs. Variable costs consist of the cost of a pre-packed buffet that will be provided by a firm of caterers at a price, which is currently being negotiated, but it is likely to be in the region of $10 per ticket sold. Required: The proposed price for the sale of a ticket is $20. The management of Lee has requested the following information:
a. The number of tickets that must be sold to break even (that is, the point at which there is neither a profit nor a loss).
b. How many tickets must be sold to earn $30 000 target profit?
c. What profit would result if 8000 tickets were sold?
d. What selling price would have to be charged to give a profit of $30 000 on sales of 8000 tickets, fixed costs of $60 000 and variable costs of $10 per ticket?
e. How many additional tickets must be sold to cover the extra cost of television advertising of $8000?
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