This answer results from using dividing the total fixed costs plus the after-tax desired contribution for Mr. Wonderful by the sales price of a ticket instead of by the contribution margin. The contribution margin is the ticket price minus variable costs.
This answer results from converting the after-tax desired contribution from Mr. Wonderful to an after-tax contribution by multiplying the $210,000 after-tax amount by 1 ? the tax rate. Instead, to convert the after-tax amount to a before-tax amount, it should be divided by 1 ? the tax rate.
An after-tax contribution of $210,000 must be converted to its before-tax equivalent by multiplying the after-tax amount by (1 ? tax rate). Thus, the desired before-tax contribution is $210,000 ÷ .70, which is $300,000. This desired before-tax contribution is treated as a fixed cost and break-even analysis is done. Total fixed cost, including the desired before-tax contribution, for Mr. Wonderful is $165,000 + $300,000, or $465,000. The unit contribution margin for Mr. Wonderful is $15 ($18 ? $3). Thus, the total attendance required for the performances of Mr. Wonderful will be $465,000 ÷ $15, or 31,000.
This answer results from using the desired after-tax contribution from Mr. Wonderful as a fixed cost. The after-tax desired contribution of $210,000 must be converted to a before-tax contribution before it can be used as a fixed cost. That is done by dividing it by 1 ? the tax rate.
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tarlight will also incur $565,000 of common fixed operating charges (administrative overhead, facility costs, and advertising) for the entire season, and is subject to a 30% income tax rate. If management desires Mr. Wonderful to produce an after-tax contribution of $210,000 toward the firm's overall operating income for the year, total attendance for the production would have to be