Module 2 – Case
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 (use Word)
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 (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 knowledgeablle business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner
