One of the major activities of the City Art Museum (CAM) is a Neighborhood Outreach Program, which was developed both as a publicservice and to market the museum and its other programs. One of the Outreach offerings, which is popular with both city andsuburban residents, is the weekly Evening Lecture Series. The Series provides lectures on local art and history in various locationsthroughout the greater metropolitan area.A new museum director has been hired with the goal to make the museum more self-sustaining and less reliant on donations andgovernment grants. One of the director's first actions was to ask the museum staff to put together detailed financial information on theindividual activities. The result, shown in the accompanying table, indicates that the series operates at a loss.CITY ART MUSEUMNeighborhood Outreach: Evening Lecture SeriesFor the Year Ending June 30Sales revenueCostsAdvertisingLecturer fees and expensesOperating costs (staff)Space rentalFood and bevarage expensesAllocated museum overheadTotal costsNet loss$ 389,200$ 16,600211,00029, 20013,60026,600159,000$ 456,000$ (66,800)The museum director is considering a proposal by the head of the Neighborhood Outreach Program to keep the Evening LectureSeries but expand it by offering a Weekend Lecture Series as well. The Weekend Series would be offered in a single locationdowntown near the museum itself. The program head estimates that the attendance of the combined Series (Evening and Weekend) would be double that of the currentEvening Series. The revenue of the combined Series would be 90 percent higher because of some price discounts that would beoffered. Because the Weekend Series would be new, a more intensive advertising campaign would be required. The directorestimates that advertising costs for the combined Series would be 150 percent higher than their current level. Lecturer fees andexpenses will increase by only 75 percent, because of the larger rooms used on the weekend. Staff operating costs will increase by 25percent. Rental costs for the Weekend Series will be $13,600 annually. Total food and beverage costs will increase by 60 percent withthe new Series. The larger program will require an increase in Museum overhead of $9,600. Allocated museum overhead for thecombined Series will be $36,600 annually.Required:a. Using the worksheet below, determine what will be the contribution of the expanded lecture series given these estimates.b. Are there other factors the director should consider before making a decision?Complete this question by entering your answers in the tabs below.Required AUsing the worksheet below, determine what will be the contribution of the expanded lecture series given these estimates.CITY ART MUSEUMNeighborhood Outreach: Weekend and Evening Lecture SeriesDifferential Revenues and CostsFor the Year Ending June 30RevenueCostsAdvertisingRequired BCITY ART MUSEUMNeighborhood Outreach: Weekend and Evening Lecture SeriesDifferential Revenues and CostsFor the Year Ending June 30RevenueCostsAdvertisingLecturer fees and expensesOperating costs (staff)Space rentalFood and beverage expensesAdditional museum overheadAllocated museum overheadTotal costsNet gain from combined Series< Required A$0Required

Net gains When the revenues or incomes becomes higher than the costs or expenses of the company,…

Answered: The program head estimates that the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A 90-room motel has an average room rate of $64 and average occupancy of 77%. Its fixed costs are $800,000 a year, and its variable costs total $500,000. The owner wants to increase operating income from current level to $250,000. She decides to do the following adjustments: increase price by $6 spend $30,000 more per year on marketing to compensate for the higher room rate To motivate the staff, the owner also set a $2,000 reward to the best employee Send guest fruits to each room, which costs $5 per room How many rooms does she need to sell per night?
B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 55 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $875,000. By going through research, B&B will be able to better target potential customers and will increase the probability of success to 70 percent. If successful, the baby powder will bring a present value profit (at time of initial selling) of $16.5 million. If unsuccessful, the present value payoff is $7.5 million. The appropriate discount rate is 13 percent. Calculate the NPV for the firm if it conducts customer segment research and if it goes to market immediately. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. Should the firm conduct customer segment research or go to the market immediately? multiple choice…
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