In an effort to find alternate revenue streams for their athletic program, as well as to enhance the game day experience for fans, Eastern Michigan University recently ran a pilot program to sell beer at a home football game. Despite an approximate $3,000 net loss on the program, the pilot was deemed a success because it gave them valuable information needed about fan interest and required infrastructure if they decide to move forward with more football beer sales in the future.

One potential reason for the net loss was the low attendance at the Sept. 26, 2015 game against Ball State University. Attendance for the game was 4,463, much lower than their normal attendance of approximately 6,000 fans. However, you should assume that the demand for beer (i.e., the percentage of fans that buy beer) has been correctly estimated by the pilot. In a normal season, EMU has six home football games.

For this pilot program, EMU rented some infrastructure items (i.e., tables, tents, hedges and other equipment) that would be purchased if they decided to sell beer on an ongoing basis. One of the goals of the pilot program was to give administrators information on how much they could pay for this infrastructure and still earn a profit.

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Selling beer at a home football game against Ball State didn't turn into the revenue generator Eastern Michigan University athletic officials had hoped for, but there's a reason the experiment turned into a $3,000 loss for the program. EMU assistant athletic director for media relations Greg Steiner said the school paid Arbor Brewing Co. just under $900 for the beer it sold at the Sept. 26 game against Ball State at Rynearson Stadium, peddling 559 16‑ounce beers at $7 per cup. Sales brought in just under $4,000. But the university also incurred $1,200 in costs for extra security and an additional $5,000 in one‑time rental fees for tables, tents, hedges and other equipment, bringing the total overall cost to nearly $7,100. Taking into account only the cost of the beer and extra security — and not rental fees — EMU profited roughly $3.30 per beer sold or about $1,845. "(The rental fees) were expenditures we wouldn't have going forward if we were to continue in the future with beer sales because we would buy the equipment and not have those recurring costs," Steiner said. EMU official explains $3,000 net loss from beer sales at football game. The announced attendance for the game was 4,463, with an average of one out of every eight people buying a beer. Steiner said the school isn't anticipating selling beer at any other football games this year, but officials will continue talking about beer sales and how to improve the concept going forward. He said the pilot was successful because it helped the school gauge fan interest about being able to purchase beer, and it also allowed them officials to put an infrastructure in place if future sales do happen.

Question

1. Write a profit equation for beer sales at EMU football games.

Answer rating: 100% (QA)

Actual attendance was 4463 Beers sold 559 Beers sold 559 4463 01253 or 1253 net profitloss sa... View the full answer