Cost Behavior Analysis: Purpose Of Assignment For The Case S

Cost Behavior Analysispurpose Of Assignmentthe Case Study Focuses On B

Cost Behavior Analysis Purpose of Assignment The case study focuses on break-even, margin of safety, and incremental analysis and allows students to experience working through a business scenario to apply these tools in managerial decision making. Students are required to make decisions and provide solutions based on their evaluation of financial data. Assignment Steps Resources: Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Commission (SEC) Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products.

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 $20,000 annually.

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. 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 fixed costs $105 Total expenses $61,410 Net loss $ (8,326) 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 follows: Contestants Total Cost Friday 68 $998 Saturday 96 $1,243 Sunday 83 $ 1,100 $3,341

On Wednesday after the rodeo, members of the rodeo committee met to discuss and critique the rodeo. Jonathan Edmunds, CPA and President of the Circular Club, commented that the club did not lose money. Rather, Jonathan said, "The club made an investment in the rodeo." The rodeo committee has requested an analysis of the rodeos performance and evaluation of the CPA's review. Create a minimum 5-slide presentation, including detailed speaker notes, as the committee's consultation team and respond to the following: · 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. · Calculate the dollars of ticket sales needed to earn a target profit of $12,000. · 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. Show your work in Microsoft® Word or Excel®. Complete calculations/computations using Microsoft® Word or Excel®. Format the assignment consistent with APA guidelines.

Paper For Above instruction

The scenario presented revolves around the financial analysis of a proposed professional rodeo organized by the Circular Club of Auburn, Kansas. The analysis involves calculating the break-even point, target sales for specific profit goals, and evaluating the facility's capacity to support anticipated attendance. These assessments are critical for ensuring the viability and strategic planning of the event, aiding managerial decision-making rooted in managerial accounting principles.

First, calculating the break-even point in dollars involves understanding fixed and variable costs. Fixed costs are expenses that do not change with attendance levels, such as prize money, livestock contractor fees, and arena rental. Variable costs fluctuate with the number of attendees or events, such as ticket printing or contestant hospitality. The total fixed costs for the rodeo were reported as $61,410, with additional revenues from sponsorships, ticket sales, and concessions, summing to $53,084 in receipts, indicating an initial net loss.

To determine the break-even point, we need to identify the contribution margin per ticket— the revenue remaining after subtracting variable costs from ticket sales. Ticket prices vary depending on whether tickets are purchased in advance or at the gate, and by age group. Calculating an average ticket price or focusing on specific categories can refine the analysis. For simplicity, an average ticket price considering adult ticket options priced at $8 in advance and $10 at the gate, along with children's tickets at $6 in advance and $8 at the gate, can be used, assuming a typical mix of adult and child attendance.

The target profit calculations require adjusting the requisite total sales to cover fixed costs and achieve desired net income levels—$6,000 and $12,000 respectively. These calculations are essential for setting ticket sales goals, marketing strategies, and assessing whether the current facility capacity of 2,500 patrons can generate sufficient revenue for these targets.

Moreover, evaluating whether the fairgrounds' facilities can accommodate the necessary attendance to meet financial objectives involves examining the provided seating capacity and comparing it with the required attendance for the target profits. If the attendance needed exceeds capacity, alternative venue options or strategies to increase revenue per attendee may be necessary.

In conclusion, this financial analysis offers valuable insights into the feasibility of the Circular Club’s rodeo event. Through detailed calculations and capacity assessments, management can make informed decisions ensuring both financial sustainability and community engagement, aligning with the club's long-term goals.

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