Query - Marginal Costing Sum

Resham (Carpe Diem !!!) (6535 Points)

13 October 2010  

Please help me out with this.. especially (c) & (d).

Ques from module of the chapter Marginal Costing


ABC Ltd. is planning a concert in a remote village in India. The following costs have been estimated,

Rent of Premises  -  Rs. 1300

Advertising  -  Rs. 1000

printing of tickets  - Rs.  250

Ticket sellers, Security  - Rs. 400

Wages of ABC Ltd personnel employed at the concert  - Rs.  600

Fee to artist  - Rs. 1000

There are no variable costs of staging the concert. The company is considering selling price for tickets at either Rs. 4 or Rs. 5 each


(a)  Calculate the number of tickets that must be sold at each price in order to breakeven.

(b)  Recalculate, the number of tickets which must be sold at each price in order to breakeven, if the artist agrees to change from a fixed fee of Rs. 1000 to a fee equal to 25% of the gross-sales proceeds.

(c)  Calculate the level of ticket sales, for each price, at which the company would be indifferent as between the fixed and percentage fee alternatives.

(d)  Comment on the factors which you think the company might consider in choosing between the fixed fee and the percentage fee alternative.

Answer as per module:

(a) at price Rs. 4  BES= 1138 tickets

     at price Rs. 5 BES= 910 tickets

(b) at price Rs. 4 BES= 1183 tickets

      at price Rs. 5 BES = 947 tickets

(c) 800 tickets

Am getting answers of (a) and (b).