Philadelphia 76ers Will Have A Guys' Night Out Campaign

Philadelphia 76ers Will Have A Guys Night Out Campaign For A Group

Philadelphia 76ers will have a "guys night out" campaign. For a group of 4 tickets purchased at $35 per ticket level, fans will receive a free beer and a hotdog. The cost of a beer and a hotdog to the 76ers are $2.1 and $2.3 respectively. Also, the marketing department spent the following on local ads for the game including fliers $3,000; newspaper $8,000; radio station $12,000, and TV $40,000. (a). list all the Variable Costs and Fix Costs of the campaign. (b). calculate the break even point in terms of the group set (4 tickets a set).

Paper For Above instruction

Introduction

The Philadelphia 76ers are launching a targeted promotional campaign titled "Guys Night Out," aimed at increasing group attendance at their games. This marketing initiative offers an incentive for groups of four fans who purchase tickets at a specified rate. Analyzing the various costs involved and determining the break-even point provides insights into the campaign's financial viability and strategic planning.

Identification of Variable and Fixed Costs

In any marketing and promotional campaign, understanding cost behavior is critical. Costs are traditionally classified into variable and fixed costs based on their relationship to sales volume or production level.

Variable Costs

Variable costs fluctuate directly with the number of group sets purchased. For each group of four tickets, additional costs include the provisions provided free to customers. Specifically, for each group:

  • Cost of one beer: $2.1
  • Cost of one hotdog: $2.3

Therefore, per group, the variable costs are:

  • Beer: $2.1
  • Hotdog: $2.3

Since these items are given free with each group purchase, their costs are directly proportional to the number of groups sold. The ticket price ($35 per ticket for 4 tickets) is revenue, but only the costs of goods sold (beer and hotdog) are variable costs related to the campaign. Hence, the total variable costs per group are:

Variable Costs per Group:

  • Beer: $2.1
  • Hotdog: $2.3

Fixed Costs

Fixed costs are expenses that remain constant regardless of the number of groups sold. For this campaign, fixed costs include marketing expenses incurred upfront regardless of sales volume:

  • Fliers: $3,000
  • Newspaper advertising: $8,000
  • Radio advertising: $12,000
  • TV advertising: $40,000

Total fixed costs are:

Total Fixed Costs = $3,000 + $8,000 + $12,000 + $40,000 = $63,000

This sum represents the overall campaign expenditure that must be recovered through sales.

Calculation of Break-Even Point

The break-even point is reached when total revenue equals total costs, combining fixed and variable expenses. To determine how many groups need to be sold to break even, we use the following formula:

Break-even point in groups = Fixed Costs / (Revenue per group - Variable Cost per group)

Where:

  • Revenue per group = 4 tickets × $35 = $140
  • Variable cost per group = $2.1 (beer) + $2.3 (hotdog) = $4.4

Plugging in these values:

Break-even groups = $63,000 / ($140 - $4.4) = $63,000 / $135.6 ≈ 464.7 groups

Since fractional groups are not practical, the organization must sell at least 465 groups to break even.

This means approximately 1,860 individual tickets (since each group consists of 4 tickets). The campaign will start generating a profit when the number of groups exceeds this threshold.

Conclusion

The "Guys Night Out" campaign involves initial fixed costs of $63,000 for advertising and promotional materials, with variable costs of about $4.4 per group for free hotdogs and beers. To achieve the break-even point, the 76ers need to sell at least 465 groups of four tickets, which translates to 1,860 individual tickets. This analysis underscores the importance of understanding cost structures in marketing campaigns and highlights the critical sales volume needed to turn a profit. Effective promotion and increasing group sales beyond the break-even point can ensure the campaign's success and profitability.

References

  • Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2014). Introduction to Management Accounting. Pearson.
  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting. McGraw-Hill Education.
  • Drury, C. (2013). Management and Cost Accounting. Cengage Learning.
  • Hilton, R. W., & Platt, D. (2013). Managerial Accounting: Creating Value in a Dynamic Business Environment. McGraw-Hill.
  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2018). Financial & Managerial Accounting. Wiley.
  • Anthony, R. N., & Govindarajan, V. (2007). Management Control Systems. McGraw-Hill.
  • Shim, J. K., & Siegel, J. G. (2012). Financial Management. Barron's Educational Series.
  • Simons, R. (2000). Performance Measurement & Control Systems for Implementing Strategy. Pearson.
  • Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business Review Press.
  • Burns, R., & Walker, T. (2021). Marketing Analytics: Strategic Models and Metrics. Routledge.

Related Assignments