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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, we first calculate the total number of tickets sold. The theatre has a capacity of 300 seats and the show is being presented 5 times:
Total tickets sold = 300 seats × 5 shows = 1500 tickets.
Next, we multiply the total tickets sold by the ticket price:
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 production's total costs are $200,000. It is stated that revenue from ticket sales covers 30% of total costs. Therefore, the revenue from ticket sales is:
Revenue from ticket sales = 30% × 60,000.
Now, charitable donations contribute 12.5% towards total cost:
Charitable donations = 12.5% × 25,000.
Thus, the revenue covered by ticket sales and donations is:
Total revenue covered = Revenue from ticket sales + Charitable donations = 25,000 = $85,000.
Finally, to find the government subsidy needed to cover all costs:
Government subsidy = Total costs - Total revenue covered = 85,000 = $115,000.