Question

Oneida

Music Society is a​ not-for-profit organization that brings guest artists to the​ community's greater metropolitan area. The music society just bought a small concert hall in the center of town to house its performances. The lease payments on the concert hall are expected to be

$1,000

per month. The organization pays its guest performers

$200

per concert and anticipates corresponding ticket sales to be

$1,500

per concert. The music society also incurs costs of approximately

$200

per concert for marketing and advertising. The organization pays its artistic director

$63,000

per year and expects to receive

$20,000

in donations in addition to its ticket sales.Read the requirements

LOADING...

.

Requirements 1 and 2. Determine the formula used to calculate the breakeven​ point, then enter the amounts in the formula to calculate the number of concerts needed in order to break even under the scenarios presented in

requirement 1

and

requirement 2.

​(Abbreviations used: CM​ = Contribution​ margin, Var.​ = Variable)

(

Fixed costs

-

Fixed income

) /

CM per concert

=

Concerts needed to break even

Req. 1

(

) /

$

=

Req. 2

(

-

) /

=

What is the music​ society's operating​ income/(loss) if it hires the new marketing director and holds

67

concerts per​ year?

The music society would have an operating

of

$

.

Requirement 3. The music society expects to receive a grant that would provide the organization with an additional

$11,000

toward the payment of the marketing​ director's salary. What is the breakeven point if the music society hires the marketing director and receives the​ grant?

The number of concerts needed to break even is

Requirement:

If the Bronx Music Society just breaks​ even, how many concerts does it​ hold?
2.	In addition to the​ organization's artistic​ director, the music society would like to hire a marketing director for $22,000 per year. What is the breakeven​ point? The music society anticipates that the addition of a marketing director would allow the organization to increase the number of concerts to 67 per year. What is the music​ society's operating​ income/(loss) if it hires the new marketing​ director?
3.	The music society expects to receive a grant that would provide the organization with an additional $11,000 toward the payment of the marketing​ director's salary. What is the

Answer 1

1) Fixed costs = Concert lease payments per year + Payments to Artistic director = (1000*12) + 63000 = $75000

Fixed income = Donations received = $20000

Ticket sales	1500
Guest performer	(200)
Marketing & Advertising	(200)
Contribution per concert	$1100

Concerts to be held by Broome Music to break even = (75000-20000)/1100 = 50 concerts

2) If marketing director is hired, then total fixed costs = 75000+22000 = $97000

Concerts to be held by Broome Music to break even = (97000-20000)/1100 = 70 concerts

If 67 concerts are held per year then contribution = $1100*67 = $73700

Income/(Loss) = 73700 - (97000 - 20000) = (3300)

Therefore, if it hires new marketing director there will be loss of $3300.

3) Concerts to be held by Broome Music to break even if additional grant is received = (97000-20000-11000)/1100 = 60 concerts