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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', assuming it is shown only five times, all at full capacity.
Answer
To calculate the total revenue from ticket sales, we first need to determine the maximum number of tickets sold.
Given:
- Theatre capacity = 300 seats
- Number of shows = 5
- Ticket price = $40
The total number of tickets sold at full capacity is:
ext{Total tickets sold} = ext{Capacity} imes ext{Number of shows} = 300 imes 5 = 1500
Thus, the total revenue from ticket sales is:
ext{Total Revenue} = ext{Total tickets sold} imes ext{Ticket price} = 1500 imes 40 = 60000
Therefore, the total revenue is $60,000.
Step 2
Calculate the value of the government subsidy necessary for this production to cover all of its costs.
Answer
To find the value of the government subsidy required, we first determine how much of the total costs are covered by ticket sales and charitable donations.
From the information given:
- Total production cost = $200,000
- Revenue from ticket sales = 30% of total costs = 0.30 imes 200,000 = $60,000
- Percentage covered by charitable donations = 12.5% of total costs = 0.125 imes 200,000 = $25,000
Next, we calculate the total amount covered by ticket sales and donations:
ext{Total covered} = ext{Revenue from tickets} + ext{Charitable donations} = 60000 + 25000 = 85000
Finally, the government subsidy needed is:
ext{Government subsidy} = ext{Total costs} - ext{Total covered} = 200,000 - 85,000 = 115,000
Thus, the value of the government subsidy necessary is $115,000.