Reference no: EM132546534

A University is planning a concert.

The university is considering a selling price for tickets at either $2,000 or $4,000 each

The following are the estimated costs of the proposed concert

Advertising                                                                                250,000

Wages of University Personnel employed at the concert                      600,000

Printing of tickets                                                                             350,000

Fee of singer                                                                                 2,500,000

Ticket sellers, security                                                                        200,000

Printing of tickets                                                                               500,000

Required:

Question i. Calculate the number of tickets which must be sold at each price to achieve break-even point, if the singer agrees to change from fixed fee of $ 2.5 million to a fee equal to 25% of the contribution margin.

Question ii. Calculate the level of ticket sales for each price, at which the company would be indifferent as between the fixed and percentage fee alternative.

Question iii. Comment on the factors, which you think, the company might consider in choosing between the fixed fee and percentage fee alternative.