Blockbusters Incorporated, a leading producer of movies, is currently negotiating with Liam Goodlooking, the biggest box-office attraction in the movie industry, to star in an adventure film. For a starring role, Liam normally receives a salary of $20,000,000 plus 5% of the receipts to the producer. (The producer normally receives 40% of the total paid admissions wherever the movie is shown.) However, Liam is quite optimistic about the prospects of the film and has expressed some interests in a special contract that would give him only 25% of his normal salary but increase his portion of the receipts to the producer to 20%. Other than Goodlooking’s pay, costs of producing the picture are expected to be $45,000,000. Both the producing company and prospective star have given further thought to the contract terms and concluded that some provision probably should be made for revenues to be earned from contracts authorizing showings of the movie on television. After lengthy negotiations, Goodlooking’s agent proposed the following terms: (a) a payment of $10,000,000, plus (b) 15% of the receipts to the producer from theatre admissions, plus (c) 10% of the revenues from sales of television rights. Blockbuster’s negotiating team leaves the negotiations to study the potential effect of the new compensation scheme. A study of past productions indicates that the producer can expect revenues from sales of television rights to be approximately one-eighth (12.5%) of producer’s revenues from theatre admissions. Blockbusters’ president is pleased with the opportunity to lower the fixed-payment part of the contract but is concerned about the magnitude of the two off-the-top percentages. The president of Blockbusters Incorporated has reviewed the preliminary analysis of the two contract alternatives and wishes to give further consideration to the arrangement with Goodlooking. Goodlooking's agent also having second thoughts about the alternatives and is wondering what is best for his client. At what level of receipts to the producer will Blockbusters break even under the new contract proposal?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
CASE:
Blockbusters Incorporated, a leading producer of movies, is currently negotiating with Liam Goodlooking, the biggest box-office attraction in the movie industry, to star in an adventure film. For a starring role, Liam normally receives a salary of $20,000,000 plus 5% of the receipts to the producer. (The producer normally receives 40% of the total paid admissions wherever the movie is shown.) However, Liam is quite optimistic about the prospects of the film and has expressed some interests in a special contract that would give him only 25% of his normal salary but increase his portion of the receipts to the producer to 20%. Other than Goodlooking’s pay, costs of producing the picture are expected to be $45,000,000.
Both the producing company and prospective star have given further thought to the contract terms and concluded that some provision probably should be made for revenues to be earned from contracts authorizing showings of the movie on television. After lengthy negotiations, Goodlooking’s agent proposed the following terms:
(a) a payment of $10,000,000, plus
(b) 15% of the receipts to the producer from theatre admissions, plus
(c) 10% of the revenues from sales of television rights.
Blockbuster’s negotiating team leaves the negotiations to study the potential effect of the new compensation scheme.
A study of past productions indicates that the producer can expect revenues from sales of television rights to be approximately one-eighth (12.5%) of producer’s revenues from theatre admissions. Blockbusters’ president is pleased with the opportunity to lower the fixed-payment part of the contract but is concerned about the magnitude of the two off-the-top percentages.
The president of Blockbusters Incorporated has reviewed the preliminary analysis of the two contract alternatives and wishes to give further consideration to the arrangement with Goodlooking.
Goodlooking's agent also having second thoughts about the alternatives and is wondering what is best for his client.
- At what level of receipts to the producer will Blockbusters break even under the new contract proposal?
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