The following revenue and expense figures relate to the firstyear of the rodeo.ReceiptsContributions...The following...

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Accounting

The following revenue and expense figures relate to the firstyear of the rodeo.
Receipts
Contributions from sponsors $22,000
Receipts from ticket sales $28,971
Share of concession profits $1,513
Sale of programs   $600
Total receipts $53,084
Expenses
Livestock contractor $26,000
Prize money $21,000
Contestant hospitality $3,341*
Sponsor signs for arena $1,900
Insurance $1,800
Ticket printing $1,050
Sanctioning fees $925
Entertainment $859
Judging fees $750
Port-a-potties $716
Rent $600
Hay for horses $538
Programs $500
Western hats to first 500 children $450
Hotel rooms for stock contractor $325
Utilities $300
Sand for arena $251
Miscellaneous fixedcosts                 $105
Total expenses $61,410
Net loss $ (8,326)
*The club contracted with a local caterer to provide a tent andfood for the contestants. The cost of the food was contingent onthe number of contestants each evening. Information concerning thenumber of contestants and the costs incurred are as follows:
                                  Contestants                 Total Cost
Friday                                 68 $998
Saturday                           96                        $1,243
Sunday 83 $1,100
                                                                      $3,341
Break-even point in Dollars is fixed cost / contribution marginratio
Since the variable is at 4% total revenue, the contributionmargin ratio is 96% or .96
$51,000/ .96 = $53,125
Contributions from sponsors = $25,600
Amount from ticket sales for break-even = $27,525
Compute the break-even point in dollars of ticket sales assumingAdrian and Jonathan's assumptions are correct as given in the case.This requirement is to calculate break even in dollars. The amountyou calculate will be from all sources of revenue includingcontributions from sponsors. The requirement is for ticket salesonly. Contributions from sponsors is stated in the case as $25,600.As an example, let's say that using the break even formula youcalculate break even in dollars as $60,000. This is not the answerfor the requirement. You need the amount of ticket sales whichwould be the $60,000 less $25,600 or $34,400 in ticket sales. It iscritical that you account for the contributions from the sponsors.The rest of the case deals with ticket sales revenue. If you don'tcalculate ticket sales correctly, all of the other case answers youget will be wrong.
Note: The case states that variable costs are 4% of totalrevenue. What must the contribution margin ratio be if variablecosts are 4% of total revenue?
Section 2
Shelley has just learned you are calculating the break-evenpoint in dollars of ticket sales. She is still convinced the Clubcan make a profit using the assumptions above (second bullet pointabove).
Calculate the dollars of ticket sales needed to earn a targetprofit of $6,000.
Calculate the dollars of ticket sales needed to earn a targetprofit of $12,000.
Are the facilities at the fairgrounds adequate to handle crowdsneeded to generate ticket revenues calculated above (third bulletpoint above) to earn a $6,000 profit? Show calculations to supportyour answers.

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3.6 Ratings (653 Votes)

Break even sales Amount Fixed costs Livestock contractor 2600000 Prize money 2100000 Sponsor signs for arena 190000 Insurance 180000 Judging fees 75000 Rent 60000 Programs See Answer

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In: AccountingThe following revenue and expense figures relate to the firstyear of the rodeo.ReceiptsContributions...The following revenue and expense figures relate to the firstyear of the rodeo.ReceiptsContributions from sponsors $22,000Receipts from ticket sales $28,971Share of concession profits $1,513Sale of programs $600Total receipts $53,084ExpensesLivestock contractor $26,000Prize money $21,000Contestant hospitality $3,341*Sponsor signs for arena $1,900Insurance $1,800Ticket printing $1,050Sanctioning fees $925Entertainment $859Judging fees $750Port-a-potties $716Rent $600Hay for horses $538Programs $500Western hats to first 500 children $450Hotel rooms for stock contractor $325Utilities $300Sand for arena $251Miscellaneous fixedcosts $105Total expenses $61,410Net loss $ (8,326)*The club contracted with a local caterer to provide a tent andfood for the contestants. The cost of the food was contingent onthe number of contestants each evening. Information concerning thenumber of contestants and the costs incurred are as follows: Contestants Total CostFriday 68 $998Saturday 96 $1,243Sunday 83 $1,100 $3,341Break-even point in Dollars is fixed cost / contribution marginratioSince the variable is at 4% total revenue, the contributionmargin ratio is 96% or .96$51,000/ .96 = $53,125Contributions from sponsors = $25,600Amount from ticket sales for break-even = $27,525Compute the break-even point in dollars of ticket sales assumingAdrian and Jonathan's assumptions are correct as given in the case.This requirement is to calculate break even in dollars. The amountyou calculate will be from all sources of revenue includingcontributions from sponsors. The requirement is for ticket salesonly. Contributions from sponsors is stated in the case as $25,600.As an example, let's say that using the break even formula youcalculate break even in dollars as $60,000. This is not the answerfor the requirement. You need the amount of ticket sales whichwould be the $60,000 less $25,600 or $34,400 in ticket sales. It iscritical that you account for the contributions from the sponsors.The rest of the case deals with ticket sales revenue. If you don'tcalculate ticket sales correctly, all of the other case answers youget will be wrong.Note: The case states that variable costs are 4% of totalrevenue. What must the contribution margin ratio be if variablecosts are 4% of total revenue?Section 2Shelley has just learned you are calculating the break-evenpoint in dollars of ticket sales. She is still convinced the Clubcan make a profit using the assumptions above (second bullet pointabove).Calculate the dollars of ticket sales needed to earn a targetprofit of $6,000.Calculate the dollars of ticket sales needed to earn a targetprofit of $12,000.Are the facilities at the fairgrounds adequate to handle crowdsneeded to generate ticket revenues calculated above (third bulletpoint above) to earn a $6,000 profit? Show calculations to supportyour answers.