Reference no: EM131816805
Question: Review of Relevant Costs Since the early 1960s, Neil Simon has been one of Broadway's most successful playwrights. The New York Times reported that Neil Simon planned to open his play, London Suite , off Broadway. Why? For financial reasons. Producer Emanuel Azenberg predicted the following costs before the play even opened:
Broadway ticket prices average $60, and theaters can seat about 1,000 persons per show. Off-Broadway prices average only $40, and the theaters seat only 500. Normally, plays run eight times a week, both on and off Broadway. Weekly operating expenses off Broadway average $102,000; they average an extra $150,000 on Broadway for a weekly total of $252,000.
1. Suppose 400 persons attended each show, whether on or off Broadway. Compare the weekly financial results from a Broadway production to one produced off Broadway.
2. Suppose attendance averaged 75% of capacity, whether on or off Broadway. Compare the weekly financial results from a Broadway production to one produced off Broadway.
3. Compute the attendance per show required just to cover weekly expenses (a) on Broadway and (b) off Broadway.
4. Suppose average attendance on Broadway was 600 per show and off Broadway was 400. Compute the total net profit for a 26-week run (a) on Broadway and (b) off Broadway. Be sure to include the pre-opening costs.
5. Repeat requirement 4 for a 100-week run.
6. Using attendance figures from numbers 4 and 5, compute (a) the number of weeks a Broadway production must run before it breaks even, and (b) the number of weeks an off-Broadway production must run before it breaks even.
7. Using attendance figures from numbers 4 and 5, determine how long a play must run before the profit from a Broadway production exceeds that from an off-Broadway production.
8. If you were Neil Simon, would you prefer London Suite to play on Broadway or off Broadway? Explain.
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