Carswell Cinema Harvard Case Solution & Analysis

Break-evens, market size

Break even is a point where the sales amount equals to the total cost and if the company succeed to sell break even units then the company will report no profit, no loss. Further, the excess funds generated over the breakeven point will contribute towards the profit of the organization.

The calculations in Exhibit 1, based on the results of 2008 data shows that in case the movies are organized in second week, then it will result in break even sales of $24,509 whereas if the movies are organized in first week, then it will result in a break even sales of $26,918, which indicates that setting price at $7 will result in a low breakeven point as compared to set price at $8. Further, the results in 2009 shows that the organization will report breakeven sales of $44,742 if shows are organized in first week and $62,639 if shows are organized in second week.

For the calculation part in 2008, the donation revenue has been included in the total revenue, which substantially contributed towards the breakeven sales whereas it is an activity and may represent only small portion of donation revenue as compared to total revenue, so in order to facilitate better comparison , donation revenue will be avoided.

Projected statements

The projected monthly statements for 2008 and 2009 have been calculated, so as to facilitate management to determine monthly profits. Our analysis in Exhibit 1 shows that, if Carswell organizes show in first week then it will charge ticket for $8 but on the other hand, it will also require the company to pay increased royalties at 50%, which is substantially higher as compared to royalties charged on shows organized on second week at 35%.

Exhibit 1 shows that, the total revenue of the company using shows in first week will result in total revenue of $151,938, of which theatre, concession, donation and special events segments represents a portion of $65,000, $13,938, $65,000 and $8,000 respectively. While on the other hand, shows organized in the second week will result in a total revenue of $150,422, of which theatre, concession, donation and special events segments represents a portion of $60,000, $17,422, $65,000 and $8000 respectively which shows that organizing movies in first week will result in better revenue generation. Further, organizing movies in first week will result in a total variable and fixed cost of $61,834 and $15,963 respectively whereas for other movie category it will result $52,451 and $15,963 respectively. This also led to a substantial difference in net profit which results a total of $74,140 for first weekend movies and $82,009 for the other category.

Exhibit 2 shows that, the total revenue of the company using shows in first week will result in total revenue of $102,725, of which theatre, concession and special events segments represents a portion of $78,000, $16,725 and $8,000 respectively whereas on the other hand, shows organized in the second week will result in a total revenue of $100,907, of which theatre, concession and special events segments represents a portion of $72,000, $20,907 and $8000 respectively, which shows that organizing movies in first week will result in better revenue generation. Further, organizing movies in first week will result in total variable and fixed cost of $77,366 and $15,463 respectively whereas for other movie category it will result $66,033 and $15,463 respectively. This also leads to a substantial difference in net profit, which results a total of $9,896 for first weekend movies and $19,411 for the other category.

Cash budgets

A calculation has been performed in Exhibit 3 of the monthly cash inflows and cash out flows based on two different selling prices. The results based on the selling price of $7 shows favourable cash flows throughout the year in 2008 but on the other hand, the loan repayment of $38,814 will cause the company to face adverse cash flows during the first three months of 2009. However, later on the company recovered after three months and showed a positive cash flows throughout the reaming nine months.

Further, the results based on the selling price of $8 showed favourable cash flows throughout the year in 2008 but on the other hand, loan repayment of $30,931 will cause the company to face adverse cash flows during the first five months of 2009. However. later on, the company will recover and will show positive cash flows throughout the reaming seven months................................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Carswell Cinema Case Solution Other Similar Case Solutions like

Carswell Cinema

Share This