Reference no: EM13815068

Cost-Volume-Profit Analysis

Case Assignment

The Annie Smith Dance Center

The Director of Annie Smith Dance Center is asking for assistance with the financial aspects of running a professional group of performers. She wants financial information presented in an easy to read format and a better understand of the profitability of the concerts and the organization as a whole.

The Annie Smith professional group features four dance concerts each year. Three of the dance concerts showcase a different genre. The fourth performance is a Christmas Spectacular, which is the most popular dance concert and is therefore scheduled every year. Ms. Smith has tentatively scheduled the following four dance concerts for the coming season. The schedule below shows the type and number of performances and direct cost per type of concert. 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 four concerts.

Descriptions	Number of Performances	Cost per Dance Concert (direct fixed costs)
Hip Hop Concert	10	$45,000
Jazz and Tap Dance	5	88,000
Modern Dance	10	95,000
Christmas Spectacular	20	25,000
		$253,000

Additional costs:

Variable costs associated with each performance are shown below.

Musicians	$7,500
Rental of auditorium	2,500
Dancers' compensation	7,000

General administrative and operating costs for the dance center are:

Administrative staff	$185,000
Insurance	25,000
Marketing	215,000
General office expenses	90,000

 

	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%
Modern Dance	150	$85	100%	450	$50	95%
Christmas Spectacular	150	$125	100%	450	$50	100%

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	Total Contribution/Type of Dance Concert	Direct Fixed Costs	Segment Margin/Type of Concert
1.
2.
3.
4.
Total

• Prepare a segmented income statement in good format.

• Compute the number of performances required to break even for each concert. These are separate computations for each dance concert.

• Compute break even for the organization as a whole and express the result in revenues instead of the number of performances.

• Ms. Smith wants to performance group to show at least $150,000 in operating profit. What level of revenues does the performance group need to achieve to meet this goal?

• Give a recommendation about changes Ms. Smith can make to achieve the target profit. Support your idea with computations.

Memo

Write a four or five 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

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.

Additional Requirements:

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.