Cost Volume Profit Analysis
Accounting, Essay should be no more than 2 pages, Complete Excel spreadsheet calculations, 5 references, Master program, APA style with the appropriate tables
• Please use original writing (No Plagerism)
• Please use American URLs than can be easily verified on the web on the reference page.
• Please address the memo to Annie Smith, Director of the Annie Smith Dance Center
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 knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.
ACC501 MOD02 CASE Cost–Volume–Profit Analysis
Name:
Subject:
Date of Submission:
TO: The Director Annie Smith Dance Center
FROM: ………………………………………
DATE: June 14, 2007
SUBJECT: Breaking Even in Your Organization
Introduction
Breakeven analysis is an important technique that could help your organization identify the number of performances required to avoid making losses in your organization. The same technique can also help your organization to identify the number of performances required to hit a certain profit (Tsorakidis, 2009). As a result, it is advisable to conduct a financial analysis on your organization with an aim of meeting the aforementioned objectives. Critical to the discussion is the fact that a segmented income statement will also help the Annie Smith Dance Center keep their financial records appropriately. For example, the results from the segmented income statement indicate that the Annie Smith Dance Center made a profit of $94,500. However, the profit does not meet the desired target of $150,000, which calls for the need to conduct a break even analysis. It is also crucial to highlight that the analysis was conducted on individual performances and on the entire company.
The Segmented Income Statement
From the segmented income statement below, it is evident that the Annie Smith Dance Center had a net income of $94,500. It is also clear that the Christmas spectacular, modern dance, hip-hop, and the jazz and tap performances record the highest revenues for the Annie Smith Dance Center respectively. It is notable that the types of performances have been labeled as 1 for hip-hop, 2 for jazz and tap, 3 for modern dance, and 4 for the Christmas spectacular performance.
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.
 33,000.00
 17,000.00
 16,000.00
160,000.00
45,000.00
 115,000.00
2.
 26,250.00
 17,000.00
9,250.00
46,250.00
88,000.00
 -41,750.00
3.
 34,125.00
 17,000.00
17,125.00
171,250.00
95,000.00
 76,250.00
4.
 41,250.00
 17,000.00
24250.00
485,000.00
25,000.00
 $460,000.00
Total
 134,625.00
 17,000.00
 66,625.00
 862,000.00
253,000.00
 609,500.00
Table SEQ Table \* ARABIC 1: A segmented Income Statement for the Annie Smith Dance Center.
Individual Break Even Analyses
It is considerable that the Annie Smith Dance Center could as well choose to specialize in one of the performances instead of having four performances. It is the reason why a break even analysis for individual performances was conducted. The results are indicated in table 2 below. It is evident that the Christmas spectacular, hip hop, modern dance, and the jazz and tap performances have the lowest break even points respectively. Further, some breakeven points have fractions, yet it is impossible to hold fractions of performances. Nonetheless, the problem could be solved by increasing or reducing the number of tickets in the upper and lower orchestra sections proportionately.
Type of Performance
Break Even Point
Hip Hop Performance
35.00
Jazz and Tap Dance
65.19
Modern Dance
35.62
Christmas Spectacular
22.27
Table SEQ Table \* ARABIC 2: A breakeven points for individual performances at Annie Smith Dance Center
Break Even Analysis for the Entire Company
The breakeven point for the entire company was also calculated using the weighted average price for each performance. The weighted average costs for direct fixed costs associated with each performance were also calculated. Critical to the discussion is the fact that it was assumed the number of performances would remain proportional. Consequently, the weighted averages were calculated in proportions of revenues generated by the entire company. The resulting weighted averages for the direct fixed costs and revenues were then used to find a breakeven point of 28.37 performances.
Type of Performance
Proportion to Total Revenue
Revenues
Direct fixed cost
Hip Hop Perfor...
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