NOTE: ONLY NEED TO RESPOND TO ONE BULLET BOLDED AND UNDERLINED AT THE BOTTOM. The scenario is for Info and the Calculations for the bullet above (referenced in the bullet question), is answered. BUT, need to provide calculations to answer the bullet
QUESTION TO ANSWER: ·Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues calculated above (third bullet point above) to earn a $6,000 profit? Show calculations to support your answers.
Scenario: Shelley Jones has just been elected as president of the
Circular Club of Auburn, Kansas, and she has been asked to suggest a new
fundraising activity for the club. After a considerable amount of research,
Shelley proposed the Circular Club sponsor a professional rodeo. In her
presentation to the club, Shelley recommends the fundraiser become an annual
activity with the following goals:
- Continue to grow each year
- Give back to the community
- Provide the club a presence in the community
Shelley's goal in the first year is
to have an activity that would become an "annual community event" and
would break even the first year and raise $5,000 the following year. In
addition, based on the experience of other communities, Shelley believed a
rodeo could grow in popularity so the club would eventually earn an average of
A rodeo committee was formed.
Shelley contacted the world's oldest and largest rodeo-sanctioning agency to
apply to sponsor a professional rodeo. The sanctioning agency requires a rodeo
to consist of the following five events: Bareback Riding, Bronco Riding, Steer
Wrestling, Bull Riding, and Calf Roping, Team Roping and Women's Barrels. Prize
money in the amount of $3,000 would be paid to winners in each of the seven
events. Members of the rodeo committee contracted with RJ Cattle Company, a
livestock contractor on the rodeo circuit, to provide bucking stock, fencing,
and chutes. Realizing costs associated with the rodeo were tremendous and
ticket sales would probably not be sufficient to cover the costs, the rodeo
committee sent letters to local businesses soliciting contributions in exchange
for various sponsorships. Exhibiting Sponsorships are $1,000 to exhibit
products or services, while Major Sponsorships are $600, and Chute Sponsorships
are $500 to have the name of the sponsor's business on one of the six bucking
chutes. For a contribution of $100, individual sponsors will be included in a
Friends of Rodeo list found in the rodeo programs.
A local youth group will be
contacted to provide concessions to the public and divide the profits with the
Circular Club. The Auburn Circular Club Pro Rodeo Roundup will be held on June
1, 2, and 3. The cost of an adult ticket is set at $8 in advance or $10 at the
gate; the cost of a ticket for a child 12 or younger is set at $6 in advance or
$8 at the gate. Tickets are not date-specific. Rather, one ticket will admit an
individual to one performance of his or her choice-- Friday, Saturday, or
Sunday. The rodeo committee is able to secure a location through the county
supervisors' board at a nominal cost to the Circular Club. The arrangement
allows for the use of the county fair grounds and arena for a one-week period.
Several months prior to the rodeo, members of the rodeo committee were notified
the bleachers at the arena would hold 2,500 patrons. On Saturday night, paid
attendance was 1,663, but all seats were filled due to poor gate
controls. Attendance was 898 Friday and 769 on Sunday.
The following revenue and expense
figures relate to the first year of the rodeo.
Contributions from sponsors
Receipts from ticket sales
Share of concession profits
Sale of programs
Sponsor signs for arena
Hay for horses
Western hats to first 500 children
Hotel rooms for stock contractor
Sand for arena
*The club contracted with a local
caterer to provide a tent and food for the contestants. The cost of the food
was contingent on the number of contestants each evening. Information
concerning the number of contestants and the costs incurred are as
·Shelley, Jonathan, and Adrian Stein, the Fundraising Chairperson, are
beginning to make plans for next year's rodeo. Shelley believes by negotiating
with local feed stores, inn- keepers, and other business owners, costs can be
cut dramatically. Jonathan agrees. After carefully analyzing costs, Jonathan
has estimated the fixed expenses can be pared to approximately $51,000. In
addition, Jonathan estimates variable costs are 4% of total gross receipts.
After talking with business owners who attended the rodeo, Adrian is confident
the funds solicited from sponsors will increase. Adrian is comfortable in
budgeting revenue from sponsors at $25,600. The local youth group is unwilling
to provide concessions to the audience unless they receive all of the profits.
Not having the personnel to staff the concession booth, members of the Circular
Club reluctantly agree to let the youth group have 100% of the profits from the
concessions. In addition, members of the rodeo committee, recognizing the net
income from programs was only $100, decide not to sell rodeo programs next
- Compute the break-even point in dollars of ticket sales
assuming Adrian and Jonathan are correct in their assumptions.
·Shelley has just learned you are calculating the break-even point in
dollars of ticket sales. She is still convinced the Club can make a profit
using the assumptions above (second bullet point above).
- Calculate the dollars of ticket sales needed to earn a
target profit of $6,000. (SEE ATTACHED SPREADSHEET)
- Calculate the dollars of ticket sales needed to earn a
target profit of $12,000. (SEE ATTACHED SPREADSHEET)
·Are the facilities
at the fairgrounds adequate to handle crowds needed to generate ticket revenues
calculated above (third bullet point above) to earn a $6,000 profit? Show
calculations to support your answers.