Query - Marginal Costing Sum

Ans) a)  no.of tickets that must be sold in order to BEP  :                                                                     

                                                        at Rs.4 = Rs.4550/4 =1138 tickets

                                                       at Rs.5= Rs.4550/5 = 910 tickets

 b) if ticket price is Rs.4 then contribution =Rs.3 (Rs.3 is 75% of Rs.4 ,since 25% of gross sale is 

                                                                                            artist fee)

             therefore, (4550-1000)/3 = 1183 tickets

      if ticket price is Rs.5 then contribution =Rs.3.75 (Rs.3.75 is 75% of Rs.5 ,since 25% of gross sale is 

                                                                                            artist fee)

             therefore, (4550-1000)/3.75 = 947 tickets

Ans. For C is as belo

  Fixed Cost under a.-4550 and b.-3550

difference in fixed cost is 1000/-

know if the company want to sell the ticket at 4 rs. and the options are to go for option a or b then 1000/4-3=1000, which means at 1000tickets it is indefferent to sell the tickets at 4 rs. either in option a or b,

2.if company wants to sell at 5/- and the above aptions , then difference in fixed cost 1000/5-3.75=800 tickets indiffernce point in two options.

(how i got 3.75=(5-25%of 5))

(how i got 3=(4-25%of 4)

c)

IF TICKET PRICE IS RS. 4 

CONT = RS. 3,  FIXED COST =  RS. 3550 (UNDER % METHOD)

&

CONT = RS. 4,  FIXED COST =  RS. 4550 (UNDER FIXED METHOD)

THEN

REQUIRED LEVEL WILL BE        ( 4550-3550 ) / (4-3) = 1000

IF TICKET PRICE IS RS. 5

CONT = RS. 3.75,  FIXED COST =  RS. 3550 (UNDER % METHOD)

&

CONT = RS. 5.00,  FIXED COST =  RS. 4550 (UNDER FIXED METHOD)

THEN

REQUIRED LEVEL WILL BE        ( 4550-3550 ) / (5.00 -3.75 ) = 800

d) ONE OF THE  FACTOR WHICH CO. SHOULD CONSIDER IS THE TICKET SALES LEVEL.

  IF SALE IS EXPECTED TO INCREASE CO. SHOULD OPT FOR FIXED METHOD.

Thanks a lot Santoshi, Bhargava and Sumit.

If anyone else knows other factors for ans of (d) then please reply..

d) The company should distinguish between the FIXED and VARIABLE Cost . Since here there is no variable cost  the company should consider FEE alternative only after  its BREAK EVEN COST has been obtainted and pay the ARTIST . 

Concept is Variable Cost varies with production but FIXED for PER UNIT and  Fixed cost Varies with Cost per unit and fixed for all levels of production.