Fave Motion Pictures sells movie tickets for $10 per movie patron

Accounting Feb 25, 2021

Fave Motion Pictures sells movie tickets for $10 per movie patron. Variable costs are $7.50 per movie patron and fixed costs are $50,000 per month. The company's relevant range extends to 35,000 movie patrons per month. What is Fave Motion Pictures' projected operating income if 25,000 movie patrons see movies during a month?

A) $62,500

B) $12,500

C) $250,000

D) $200,000

Expert Solution

Answer: B

Explanation: B)

Sales $10

Less Variable costs 7.50

= Contribution Margin 2.50 × 25,000 = $62,500

Less Fixed 50,000

Operating Income $12,500

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