Income and more if it can fill the pavilion maximum

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income and more, if it can fill the pavilion.Maximum per capita fee if AP can pay KFBS Allstars…180,000
The AP needs to earn 300,000 before taxes to realize 180,000 after tax operating income. C = percapita fee, and recall that the comp rate for per capita contracts is 2.5%. (500) of the ticketpaying patrons, so ticket sales are expected to be 19,500. Then,CM from paying ticket + CM from non-paying = new fixed cost + desired profit(37.03-C) x 19,500 + 10.04 x 500 = 102,610 + 300,000C = 16.64. At the average ticket price of 22.12, the performer on a per capita fee contract canexpect to receive a total of $324,495 (16.64 x 19,500)CVP Analysis and Operating LeverageOperating Leverage = Contribution Margin/Operating Income.Operating leverage will be high when fixed costs are high.The ALLTEL Pavilion is a fixed fee situation because the fixed costs, including the fixed fee topay the performer, will be high. (This means high operating leverage)As a result, the high fixed fee increases the amount of the loss if attendance falls below break-even.The high risk makes reaching the breakeven point important when contracting fixed feeperformances.In contrast, attaining break even is most likely not a major hurdle for concerts per capita artistsbecause of the substantially lower FC (low FC and low operating leverage) and the high drawingpower of per capita artists.However, the pavilion would enjoy a high operating leverage forperformances by fixed fee performers, thus the potential for large gains with this type of contract.
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Term
Spring
Professor
GATTIS,LOUIS

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