Norvik Enterprises operate in the leisure and entertainment industry and one of its activities is to promote concerts at locations throughout Europe. The company is examining the viability of a concert in Stockholm. Estimated fixed costs are £60 000. These include the fees paid to perfomers, the hire of the venue and advertising costs. Variable costs consist of the cost of a pre-packed buffet which will be provided by a firm of caterers at a price, which is currently being negotiated, but it is likely to be in the region of £10 per ticket sold. The proposed price for the sale of a ticket is £20. The management of Norvic have requested the following information:
1. The number of tickets that must be sold to break-even (that is, the point at which there is neither a profit or loss).
2. How many tickets must be sold to earn £30 000 target profit?
3. What profit would result if 8000 tickets were sold?
4. What selling price would have to be charged to give a profit of £30 000 on sales of 8000 tickets, fixed costs of £60 000 and variable costs of £10 per ticket?
5. How many additional tickets must be sold to cover the extra cost of television advertising of £8000?