Southwestern University (SWU), located 30 miles southwest of the Dallas/Fort Worth metroplex, has witnessed tremendous growth in
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Question:
Selling Variable Percent
ItemPrice/UnitCost/UnitRevenue
Soft drink$1.50 $ .75 25%
Coffee 2.00 .50 25%
Hot dogs 2.00 .80 20%
Hamburgers 2.50 1.00 20%
Misc. snacks 1.00 .40 10%
Maddux fixed costs are interesting. He estimated that the prorated portion of the stadium cost would be: salaries for food services at $100,000 ($20,000 for each of the five home games); 2,400 square feet of stadium space at $2 per square foot per game; and six people in each of the six booths for 5 hours at $7 an hour. This fixed cost will be proportionately allocated to each of the products based on percentages provided in the table. For example, the revenue from soft drinks would be expected to cover 25% of the total fixed cost.
Maddux wants to be sure that he has a number of things for President Starr:
1, the total fixed cost that must be covered at each of the games.
2, the portion of the fixed cost that must be covered at each of the games/
3, what his unit sales would be at break-even for each item- that is, what sales of soft drinks, coffee, hot dogs, and hamburgers are necessary to cover the portion of the fixed cost allocated to each of these items.
4, what the dollar sales for each of these would be at these break-even points, and
5, realistic sales estimates per attendee for attendance of 60,000 and 35,000 (in other words, he wants to know how many dollars each attendee is spending on food at his projected break-even sales at present and if attendance grows to 60,000). He felt this last piece of information would be helpful to understand how realistic the assumptions of his model are, and this information could be compared with similar figures from previous seasons.
DISCUSSION QUESTION
Prepare the report with the items noted so it is ready for Dr. Starr at the next meeting.
Related Book For
Principles of Operations Management Sustainability and Supply Chain Management
ISBN: 978-0134181981
10th edition
Authors: Jay Heizer, Barry Render, Chuck Munson
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