National Entertainers Ltd. operates in the leisure and entertainment industry and one of its activities is to promote concerts in location throughout North America. The company is examining the viability of a concert in New Jersey. Estimated fixed cost is $125,000. These include fees paid to the performers, the hire of venue and advertising cost. Variable cost consist of the cost of a pre-packed buffet which will be provided by a catering firm, 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 ticket is $25 and the management expects 10,000 tickets to be sold. The management of National Entertainers have requested the following information:

1) The number of tickets that must be sold to breakeven (both in terms of sales and units)? Explain your results.

2) How many tickets must be sold to earn $30,000 profit?

3) What profit/loss would result if 8,000 tickets are sold?

4) Estimate the margin of safety for a sale of 10,000 tickets (both in sales and % age terms). Explain your result.

5) Suppose if the management expectations of ticket sales increase by 25%, with fixed cost and selling price per ticket remaining constant, what would be the % age increase in profit

6) Draw a CVP Graph for the given scenario based on volume range of 0 tickets to 14,000 tickets sold? Label the graphs and clearly indicate the BEP (units/sales), profit/loss region and the cost lines.

7) Using appropriate literature, Explain the results in light of the assumptions and limitations of CVP analysis

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