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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 find the total revenue from ticket sales:
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Determine the total number of seats:
Total seats = 300
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Calculate the total audience for 5 shows:
Total audience = 300 seats/show × 5 shows = 1500 seats
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Calculate the total ticket sales revenue:
Ticket price = $40
Total revenue = Total audience × Ticket price
Total revenue = 1500 seats × 60,000
Therefore, the total revenue from ticket sales is $60,000.
Step 2
Calculate the value of the government subsidy necessary for this production to cover all of its costs
Answer
To calculate the government subsidy needed:
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Identify the total costs and the contributions:
Total costs = $200,000 Revenue from ticket sales covers 30% of total costs:
Ticket sales contribution = 0.30 × 60,000
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Determine the portion covered by charitable donations: Charitable donations contribute 12.5% of total costs:
Donations = 0.125 × 25,000
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Calculate the total amount covered by sales and donations:
Covered amount = Ticket sales contribution + Donations
Covered amount = 25,000 = $85,000 -
Calculate the remaining amount that needs to be covered by the government subsidy:
Subsidy = Total costs - Covered amount
Subsidy = 85,000 = $115,000
Therefore, the government subsidy necessary to cover all costs is $115,000.