Cost–Volume–Profit Analysis

She wants financial information presented in an easy to read
format and a better understanding of the profitability of the concerts
and the organization as a whole.
The Annie Smith professional group features three styles of dance
concerts each year. Two of the dance concerts showcase a different
genre. The third performance is a Christmas Spectacular, which is the
most popular and is therefore scheduled every year. The table below
provides information about expected ticket sales for the performances.

Lower Orchestra Section (A)
Upper Orchestra Section (B)

Descriptions
No. of Seats.
Ticket Price
Tickets sold per performance
No. of seats
Ticket Price
Tickets sold per performance

Hip-Hop Performance
150
$85
100%
450
$50
90%

Jazz and Tap Dance
150
$85
100%
450
$50
60%

Christmas Spectacular
150
$125
100%
450
$50
100%

Ms. Smith has prepared a tentative schedule for the coming season.
The table below also shows the type and number of performances and
direct cost per type of concert.

Descriptions
Number of Performances
Cost per Dance Concert(direct fixed costs)*

Hip-Hop Concert
10
$48,000

Jazz and Tap Dance
5
86,000

Christmas Spectacular
20
22,000

Total Direct Fixed Costs

$156,000

*Examples of direct fixed costs are costumes, rehearsals, royalties,
guest artist fees, choreography, and salaries of production staff,
music, and wardrobe for each of the concerts. This amount does not
change with the number of performances.
Additional costs:
Variable costs associated with each performance are shown below.

Musicians
$6,100

Rental of auditorium
2,500

Dancers’ compensation
6,700

Annual general administrative and operating costs for the dance center are:

Administrative staff
$185,000

Insurance
25,000

Marketing
115,000

General office expenses
90,000

Case Assignment
Required:
Computations (use Excel)
Summarize key financial information in a table as shown below.

Title

Name of Dance Concert
Revenues/Performance
Variable Costs/Performance
Contribution Margin/Performance
Number of Performances
Total Contribution/Type of Dance Concert
Direct Fixed Costs
Segment Margin/Type of Concert

1.

2.

3.

Total

Use the information in the table you completed to compute the number
of performances required to break even for each concert. Do not include
general and administrative expenses. These are separate computations
for each dance concert.
Compute break even for the organization as a whole (include all
fixed expenses) and express the result in revenues instead of the number
of performances.
Ms. Smith wants the Dance Center to generate at least $200,000 in
operating profit. What level of revenues does the performance group need
to achieve to meet this goal? Prepare an income statement in good
format to support the computations.
Give a recommendation about changes Ms. Smith can implement to achieve the target profit. Support your idea with computations.
Memo (use Word)
Write a 4- or 5-paragraph memo to the owner of the dance center to
assist her in interpreting the financial analysis. Start with an
introduction and end with a recommendation. Each of the four or five
paragraphs should have a heading.
Short Essay (use Word)
Start with an introduction and end with a summary or conclusion. Use headings.
What are some shortcomings of multi-product even analysis?
How does demand and resource constraints affect this type of analysis.
Assignment Expectations
Each submission should include two files: (1) An Excel file and (2) a
Word document. The Word document shows the memo first and short essay
last. Assume a knowledgeable business audience and use required format
and length. Individuals in business are busy and want information
presented in an organized and concise manner.