Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
8.18 CVP, movie production. (10 min)
1 Fixed costs = €5,000,000 (production cost) Unit variable cost = €0.20 per €1 revenue (marketing fee) Unit contribution margin = €0.80 per €1
revenue a Fixed costs
Break even point in revenues = Unit contribution margin per € 1 revenue
=
€5,000,000
€0.80
=
€6,250,000
b Espasso receives 62.5% of box-office receipts.
Box-office receipts of €10,000,000 translate to €6,250,000 in revenues to Espasso.
2 Revenues,
0.625
× €300,000,000
€187,500,000
Variable costs, 0.20
× €187,500,000 37,500,000 Contribution margin
150,000,000
Fixed costs 5,000,000 Operating income
€145,000,000
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