The directors of Hightown United Football Club Ltd are preparing for a meeting with their bank manager to discuss the availability of funds to be used to buy new players.

The following information is available:

1 The Hightown United stadium is divided into three separate spectator areas:

2 Other income:
Sponsorship: £100,000 fixed fee plus 5% of gross takings for each match.
Advertising: £150,000 per year.
Programmes and refreshments: 70 pence per spectator.
3 Cost of holding a match:
Manning turnstiles: 15 pence per spectator.
Police presence: £200 per 1,000 spectators.
Advertising and crowd entertainment: £1,000 per match.

If a match is cancelled, turnstile manning and police costs are not incurred but the cost of advertising and crowd entertainments will be paid in advance and will not be recoverable.
4 Other annual running costs:

5 Expected attendances:

past performance. At worst the team might play only one home game in each competition.
The bank manager has asked that the following information be provided for the meeting:
1 A statement showing the budgeted surplus expected to be generated during the forthcoming season.
2 A calculation of the percentage fall in average attendances which could be tolerated before reaching a break-even point.
3 A calculation of the percentage increase which would have to be applied to spectator charges to maintain the budgeted surplus if all expenses were 10% higher than budget but advertising revenue and the fixed sponsorship fee did not increase.
Required Prepare a report for the directors, containing the information requested by the bank manager and identifying any limitations of the analysis carried out.

Transcribed Image Text:

Ground Enclosure Stand Spectator entry fee per person 3.00 4.00 5.00 Attendance norm 70% of crowd 20% of crowd 10% of crowd