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Patrick Street Productions produces musicals - Edexcel - A-Level Economics A - Question 4 - 2021 - Paper 1
Question 4
Patrick Street Productions produces musicals. Its latest production is ‘It’s a Wonderful Life’ and the total cost of this production is $200,000. The ticket price is... show full transcript
Worked Solution & Example Answer:Patrick Street Productions produces musicals - Edexcel - A-Level Economics A - Question 4 - 2021 - Paper 1
Step 1
Calculate the total revenue from ticket sales for ‘It’s a Wonderful Life’
Answer
To calculate the total revenue from ticket sales, we first determine the total number of tickets sold:
Total seats = 300
If the show is performed 5 times at full capacity:
Total tickets sold = 300 seats × 5 shows = 1500 tickets
Next, we calculate the revenue:
Ticket price = $40
Total revenue = 1500 tickets × 60,000
Step 2
Calculate the value of the government subsidy necessary for this production to cover all of its costs
Answer
The total cost of the production is $200,000. The production aims to cover this cost through ticket sales, charitable donations, and a government subsidy.
We know that ticket sales cover 30% of the total costs:
Revenue from ticket sales = 30% of 60,000
Charitable donations cover 12.5% of total costs:
Charitable donations = 12.5% of 25,000
Now, we need to find out how much is left to cover through the government subsidy:
Total funds from ticket sales and charitable donations = 25,000 = $85,000
Amount needed from government subsidy = Total cost - Total funds from ticket sales and donations = 85,000 = $115,000
Thus, the value of the government subsidy required is $115,000.