The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses). Based on the following revenue and cost information, the organizers would like answers to several questions. There are three sources of revenue for the concert: Tickets will be sold for $14.00 each. A large multinational corporation headquartered in Chicago will donate $2.00 per ticket sold. Each concert attendee is expected to spend an average of $20.00 for parking, food, and merchandise. On the expense side, there are also three components: A popular national group has agreed to perform at the concert. Normally, the group demands a significant fixed fee to perform, but to reduce the risk for the organizers, the group has agreed to perform for $6.50 per ticket sold. The organizers will pay several companies to operate the parking. food, and merchandise concessions. They will pay $20,000 plus 15% of all parking, food, and merchandise revenue. The organizers will pay the pavilion $95,000 plus $6.00 per person attending to cover its operating expenses (production, maintenance, advertising, etc.). 1. What is the estimated contribution margin per ticket sold for the benefit concert? 2. What are the estimated total fixed costs for the benefit concert?
The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses). Based on the following revenue and cost information, the organizers would like answers to several questions. There are three sources of revenue for the concert: Tickets will be sold for $14.00 each. A large multinational corporation headquartered in Chicago will donate $2.00 per ticket sold. Each concert attendee is expected to spend an average of $20.00 for parking, food, and merchandise. On the expense side, there are also three components: A popular national group has agreed to perform at the concert. Normally, the group demands a significant fixed fee to perform, but to reduce the risk for the organizers, the group has agreed to perform for $6.50 per ticket sold. The organizers will pay several companies to operate the parking. food, and merchandise concessions. They will pay $20,000 plus 15% of all parking, food, and merchandise revenue. The organizers will pay the pavilion $95,000 plus $6.00 per person attending to cover its operating expenses (production, maintenance, advertising, etc.). 1. What is the estimated contribution margin per ticket sold for the benefit concert? 2. What are the estimated total fixed costs for the benefit concert?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The Pritzker Music Pavilion in downtown Chicago is a
technologically sophisticated and uniquely designed performing
arts venue that hosts live concerts attended by over half a million
patrons a year. A group of local organizers, led by a prominent local
businesswoman, would like to use the pavilion for a concert to
benefit Ceres, a non-profit, national network of investors and
environmental organizations working with companies and investors
to address sustainability challenges such as global climate change. If
the pavilion management agrees to host the concert, the organizers
will donate all profits to Ceres (or absorb any losses).
Based on the following revenue and cost information, the
organizers would like answers to several questions. There are three
sources of revenue for the concert: Tickets will be sold for $14.00
each.
A large multinational corporation headquartered in Chicago will
donate $2.00 per ticket sold.
Each concert attendee is expected to spend an average of $20.00 for
parking, food, and merchandise.
On the expense side, there are also three components: A popular
national group has agreed to perform at the concert. Normally, the
group demands a significant fixed fee to perform, but to reduce the
risk for the organizers, the group has agreed to perform for $6.50
per ticket sold.
The organizers will pay several companies to operate the parking.
food, and merchandise concessions. They will pay $20,000 plus 15%
of all parking, food, and merchandise revenue.
The organizers will pay the pavilion $95,000 plus $6.00 per person
attending to cover its operating expenses (production,
maintenance, advertising, etc.).
1. What is the estimated contribution margin per ticket sold for the
benefit concert?
2. What are the estimated total fixed costs for the benefit concert?
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