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You work for an institutional Foodservice company that provides services to stadiums around the country....

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Accounting

You work for an institutional Foodservice company that provides services to stadiums around the country. Recently, one of the contracts for one of the stadiums has come due, and the stadium owners have sent you a revised proposal. You need to determine which is the better contract from your companies perspective. The Company has requested you to analyze this at three potential levels of revenue due to the uncertainty regarding the allowable stadium capacity post COVID19.

Pertinent Information follows:

Scenario Low Medium High
Revenue $ 350,000 $ 550,000 $ 750,000
Variable Costs 65%

Two proposals are for a fixed base rent of $110,000 per year OR a Fixed base rent of $50,000 and a percentage rent of 15% of revenue.

Calculate the profitability for this proposal for each of the three revenue levels, and for the two proposals. Show your work.

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