[bishop9413]

Fixed Cost: $50,000
Variable Cost: 40% of gate receipts
Ticket Cost: $12.50

What is the break even point?
If profit goal is $15k, how many tickets must be sold?
What is total profit/loss if 6500 tickets were sold?
If attendance is 7500, what ticket price would enable venue to break even?

[ebaines]

Not going to do your homework for you. However, there are a few key concepts that you need to use:

A. Contribution margin is the diffrence between the price of a unit and its variable cost. Contribution margin is what you get from each sold unit to either pay off fixed expenses or add to your profit.
B. Break even is when you sell enough widgets for the contribution margin to cover your fixed costs.
C. The profit you make is equal to the contribution margin per unit times the difference between the number of units sold and the number of units required to break even.

Now, apply these concepts to your problems:

1. First from the data you were given find the contribution margin per unit. Then divide the fixed costs by the contribution margin per unit. This tells you how many units you have to sell to break even, meaning that your revenue equals the total of variable plus fixed costs.
2. Once you have reached break even, from then all the contribution from additional sales goes right to the bottom line (profit). So the additional units you need to sell to make $15K in profit is $15K divided by the margin per unit. Remember, the total number of units you need to sell is this plus what you had to sell to break even.
3. The profit on 6500 units is the margin per unit times the number of units that 6500 represents above the break even point. For example, if the break even point was 1000 units, the profit you get on selling 6500 units is equal to the contribution margin per unit times (6500-1000).
4. To determine the price to break even on sales of 7500, divide the fixed cost by 7500 to determine the required contribution margin per unit. Then set price = required contribution margin per unit + variable cost per unit.