Breakeven Analysis The Bentley Student As

Breakeven Analysis1 Breakeven Analysisthe Bentley Student Associatio

The Bentley Student Association (BSA) is organizing a fundraising event at the Kennedy Museum, involving multiple expenses and revenue streams. The core of this analysis revolves around determining the maximum amount the BSA can allocate for entertainment costs, specifically paying the Dizzy Gillespie Heritage Band, without incurring losses. Additionally, strategic recommendations focus on optimizing revenue and evaluating adjustments to pricing and costs to enhance the event's profitability.

Paper For Above instruction

The primary objective for the Bentley Student Association (BSA) is to ensure a profitable fundraising event by analyzing and calculating the breakeven point for entertainment expenses, specifically the payment to the Dizzy Gillespie Heritage Band. The event's financial structure involves various fixed and variable costs, along with revenue generated from ticket sales. To identify the maximum allowable expenditure on entertainment that does not result in a loss, it is essential to analyze the event’s revenue and expense components thoroughly.

Event Revenue and Expenses Overview

The BSA plans to hold the event at the Kennedy Museum, which charges a flat fee of $600 for venue rental. Catering services are provided by Sylvia’s Restaurant, charging a flat fee of $400 plus $20 per attendee. Ticket sales are priced at $50 each, and the expected attendance is approximately 100 participants, comprising students and alumni. This setup results in a straightforward revenue calculation: with 100 attendees each paying $50, total revenue amounts to $5,000.

On the expense side, fixed costs include venue rental ($600) and catering ($400 plus variable $20 per person, totaling $2,400 for 100 guests). The entertainment cost, namely the performance by the Dizzy Gillespie Heritage Band, is variable and the subject of the breakeven analysis.

Calculating the Breakeven Entertainment Cost

The total revenue from the event can be summarized as:

• Ticket Revenue = 100 tickets x $50 = $5,000

The total fixed costs are:

• Venue = $600
• Catering = $400 + (100 x $20) = $2,400

The sum of fixed costs (excluding entertainment) is $3,000. Therefore, the maximum entertainment cost the BSA can incur without losing money (breakeven point) is calculated by subtracting total fixed costs from total revenue:

Maximum Entertainment Cost = Total Revenue - Fixed Costs

$5,000 - $3,000 = $2,000

This calculation indicates that the BSA can allocate up to $2,000 for the band performance without incurring a net loss. Any expense beyond this amount would reduce profitability, illustrating the importance of strict cost management in fundraising events.

Assessing Whether to Pay the Breakeven Cost for Entertainment

It is generally unfavorable for the BSA to pay exactly the breakeven amount for entertainment because it leaves no profit margin, which is contrary to the primary purpose of a fundraising event. Profits from such events are typically reinvested into student activities or used to support other organizational programs. Therefore, paying the maximum breakeven amount would mean the BSA neither gains nor loses financial value from the entertainment expenditure, which diminishes the incentive to prioritize this expense unless it is critical for attracting attendees or ensuring event success.

Strategies to Increase Revenue

The BSA can adopt several approaches to enhance the revenue of the fundraiser:

• Increase Ticket Price: Raising the ticket price can directly boost revenue; however, it might lead to reduced attendance if prices become prohibitive.
• Expand Marketing Efforts: Promoting the event more extensively through digital channels, posters, and word-of-mouth can increase attendance beyond initial estimates.
• Secure Additional Sponsorships: Partnering with local businesses or alumni can provide supplemental funding or donations, improving overall revenue margins.
• Offer Additional Activities or Auctions: Incorporating raffle draws or silent auctions can generate extra income during the event.
• Reduce Costs Without Compromising Quality: Negotiating better rates for venue, catering, or entertainment can lower expenses and increase net proceeds.

Impact of Raising Admission Price

Adjusting the ticket price can influence attendance and profitability. The pros of increasing the admission fee include higher per-attendee revenue, which can improve overall profitability if attendance remains stable. However, higher prices risk decreasing attendance levels, especially among students with limited budgets, potentially reducing total revenue due to fewer participants.

Conversely, a lower ticket price may attract more attendees, increasing total revenue despite a lower price point, but could diminish overall profit margins unless costs are simultaneously reduced. The optimal ticket price strategy involves balancing potential attendance drop-offs with increased per-person revenue, which requires careful market analysis and sensitivity testing.

Conclusion

Based on the breakeven analysis, the BSA should limit the entertainment expenditure to $2,000 to avoid losses. Additionally, implementing revenue-enhancing strategies, such as increasing ticket prices judiciously and expanding promotional efforts, can significantly improve the financial outcome. While raising admission fees can increase individual contributions, it must be balanced against the risk of decreased attendance. Cost control measures and alternative revenue sources are crucial for maximizing profitability in future events.

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