Live presentation was 15 minutes in length and all four of our group members participated. The presentation mirrored our written report and was graded on the following criteria: • Clearly identified and well-researched demographics. • Knowledge of the project and information presented. • Ability to community financial information to a non-financial user. • Group preparedness (order and flow). • Professionalism in terms of appearance and style of presentation. • Quality of visual aids (PowerPoint slides, charts, props, etc.) • Eye contact, voice projection, time management. • Responses to panel’s questions.

1. Group Project II
12/13/14
BY:
Tim Callahan
Kelly Kuhn
John Mano
Christie Stevens
Managerial Accounting

2. American Cinema Theatre
• Bob and Trisha Johnson, owners of the American Cinema
Theatre (ACT), have sought out Blue Group Consulting for
recommendations on what their next business step should be.
• They currently own a regular theatre. This theatre shows new
and current movies year round; 80,000 tickets were sold in
their first year of business at $12 a ticket.
• It has been a profitable and safe investment for the Johnsons to
date, however they are looking for change and increased
profitability.

3. Alternative 1
• Alternative 1 was the consideration of a discount theatre which
would show older, out-of-date movies that the average
consumer most likely has already seen.
• Ticket prices would drop from $12 to $7.
• Ticket sales would increase from 80,000 to 100,000 tickets
sold per year.

4. Alternative 2
• Alternative 2 is installing digital projection equipment in ACT,
essentially making it a 3D theatre.
• A 3D theatre would provide an experience that will be quite
different than that of a regular or discount theatre.
• Ticket prices would increase from $12 to $17.50.
• Ticket sales stay constant at 80,000 tickets sold per year, same
as the regular theatre.

5. Location: Menifee, CA.
• Median household income:
• Menifee: $53,941, California average: $58,328
• Median house or condo value:
• Menifee $219,614, California average: $349,400
• New single-family house building permits per 10,000
residents:
• Menifee: 44 permits per 10,000 , California average: 8 permits
per 10,000

6. Degree of Operating Leverage
• Discount theatre: from 1.78
to 2.06
• Not a good thing in this
case since our revenue is
decreasing making the
theatre more volatile.
• Luxury theatre: from 1.78
to 4.27
• Not a bad thing since our
revenue will be rapidly
increasing.

7. Ticket Sales
• Examining our ticket sales
by looking at a sample net
income of $170,000.
• To reach that income in our
current situation we would
have to sell 97,500 tickets
and with the discount
theatre 127,273 tickets.
• For the luxury theatre we
would have to sell 92,500
tickets.
• What this means to us.

8. 20% Decline in Sales Effect
• With a 20% decline in
sales, regular net income
would drop to $78,880 and
discount theatre would drop
to $63,920.
• A luxury theatre would
drop to $14,960.
• What this means to us.

9. 20% Increase in Sales: Net Income
• Regular theater: $165,920
• Discount theater: $153,680
• 3D Theater: $189,040
• 3D Theater outperforms
• Discount theater can’t catch
up

10. Sales Greatly Increase: +900%
• Net Income:
• Regular Theater: $2,080,800
• Discount Theater: $2,128,400
• 3D Theater: $4,018,800
• 3D Theater outperforms all,
outperforms regular by $1,938,000, or 93%
• Discount theater outperforms regular by $47,600, or 2.3%

11. Sales Greatly Decrease: 50% Decline
• Net Income
• Regular: $13,600
• Discount: (3,400)
• 3D: (115,600)
• 3D and Discount theaters
both suffer losses
• Operating leverage
• Regular = 1.78
• Discount = 2.06, 3D = 4.27
• 3D (after $350,000 fixed costs removed) = 1.28

12. X-Factor
• Future Sales: 3D
• Fixed costs go back
down to $140,000/yr
3D Theater Equivalent Sales 50% Reduction
Sales $1,400,000.00 $700,000.00
Variable costs $760,000.00 $380,000.00
Contribution margin $640,000.00 $320,000.00
Fixed costs $140,000.00 $140,000.00
Income before taxes $500,000.00 $180,000.00
Income taxes (32% rate) $160,000.00 $57,600.00
Net income $340,000.00 $122,400.00

13. Typical Moviegoers
• Highest attendance on nights, weekends
• Age groups 25-39 and 18-24 are the most frequent
• Lowest attendance afternoons, weekdays, age 50+, and age
below 11
• Source: www.indiewire.com

14. Improving Sales
• Make better movies!
• Better theater experience:
• Large, beautiful screen
• Surround sound
• No sticky floors
• Promotions:
• Matinee/afternoon discount, senior/child discount
• Movie theater memberships

15. MARKETING MARKETING
MARKETING
• Speak to Target Audience
• Create Destination Theater
• Maximize New Release Marketing by Production Houses
• Hire an Outside Marketing Firm to Plan Events

16. Destination Theatre
• Capture their hearts
and they will return.
• Inexpensive marketing
techniques
• Direct Mail $1,500.00 per mailing
• Reach 100,000 homes, 5% of budget
• 1% return on each mailing 1,000 tickets
• Redemption coupons, tracking - Calendar of Events, timing

17. Timing
• Capitalize on Down Time – with each paid admission
• After School Princess Meet and Greets
second and fourth Tuesday
• Pirate Show at SunDown on first
and third Wednesday
Monday Afternoon Golden Year Films

18. Conclusion
• Bob and Trisha should decide alternative #2 due to its great
potential for success.
• Sales will remain the same and there will likely be an increase
soon given the status of the market.
• Once initial fixed costs have been paid for and the market
continues to rise, Bob and Trisha will be making a higher net
income then any other option.

19. Works Cited
• Menifee, CA. City-Data.com, 2014. Internet. December 5, 2015.
• Riffkin, Rebecca. Americans' Consumer Spending Inches Up in November.
Gallup, December 1, 2014. Internet. December 5, 2014.
• Upcoming Movies 2015. Movie Insider, 2014. Internet. December 5, 2014.
• Weekend Box Office: November 28-30, 2014. Box Office Mojo, December
1, 2014. Internet. December 5, 2014.