Module 2 – Case
Cost–Volume–Profit Analysis
Assignment Overview
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 understanding of the profitability of the concerts and the organization as a whole.
The Annie Smith professional group features three styles of dance concerts each year. Two of the dance concerts showcase a different genre. The third performance is a Christmas Spectacular, which is the most
popular and is therefore scheduled every year. The table below provides information about expected ticket sales for the performances.
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%
Christmas
Spectacular 150 $125 100% 450 $50 100%
Ms. Smith has prepared a tentative schedule for the coming season. The table below also shows the type and number of performances and direct cost per type of concert.
Descriptions Number of Performances Cost per Dance Concert
(direct fixed costs)*
Hip-Hop Concert 10 $48,000
Jazz and Tap Dance 5 86,000
Christmas Spectacular 20 22,000
Total Direct Fixed Costs $156,000
*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 concerts. This amount does not change with
the number of performances.
Additional costs:
Variable costs associated with each performance are shown below.
Musicians $6,100
Rental of auditorium 2,500
Dancers’ compensation 6,700
Annual general administrative and operating costs for the dance center are:
Administrative staff $185,000
Insurance 25,000
Marketing 115,000
General office expenses 90,000
Case Assignment
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
Number of
Performances
Total
Contribution/
Type of
Dance
Concert
Direct
Fixed
Costs
Segment
Margin/
Type of
Concert
1.
2.
3.
Total
Use the information in the table you completed to compute the number of performances required to break even for each concert. Do not include general and administrative expenses. These are separate
computations for each dance concert.
Compute break even for the organization as a whole (include all fixed expenses) and express the result in revenues instead of the number of performances.
Ms. Smith wants the Dance Center to generate at least $200,000 in operating profit. What level of
revenues does the performance group need to achieve to meet this goal? Prepare an income statement
in good format to support the computations.
Give a recommendation about changes Ms. Smith can implement to achieve the target profit. Support
your idea with computations.
Memo (use Word)
Write a 4- or 5-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 (use Word)
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.
Assignment Expectations
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.
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