Profit planning model and CVP The City of Rock Ridge is considering building and operating a small event centre that can host second and third level professional sporting events and music concerts. Rock Ridge must balance its budget each year and cannot subsidise activities like this; that is, the event centre must be self-sustaining. Although the city can borrow funds to finance the construction of an event centre, the centre must be profitable enough to retire its associated debt in no more than 20 years. The table below presents planned operating data presented by a citizen group that represents both advocates and opponents of the proposal. The design of the centre will provide flexible seating and staging to accommodate both athletic and concert events with no loss of seating capacity. The city council has required that the event centre caters to the needs of elderly residents, who otherwise would not be able to attend events, for a minimum of 6 events per annum. This will involve providing prime seats, transportation, and refreshments for at least 50 elderly citizens for each event.

Required:
1. Prepare a profit planning model for the city's proposed event centre using the ‘Most likely’ input values.
2. Use the model to compute the annual break-even percentage of seats sold.

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Range Input data Most likely High Low Arena seating capacity per event 3,000 3,100 2,900 Athletic events per annum 50 60 40 Concerts per annum 12 16 Average percentage of seats sold per event 80% 90% 70% Sales price per ticket - Prime seats $25.00 $ 30.00 $ 20.00 General admission seats 10.00 12.00 6.00 Sales mix assumption - Prime seats 10% 20% 5% General admission seats 90% 80% 95% Printing and administrative cost per ticket $2.00 $ 3.00 $ 1.00 Cost per event - Athletic event 3000 5000 2500 - Concert (additional) 25000 30000 20000 Administrative cost per annum - Athletic 80000 95000 60000 events - Concerts Elderly customers Cost per elderly customer Costs per annum - Building - General administration 28000 32000 20,000 Elderly customer-friendly events 12 16 6 60 80 50 95 110 80 $ 200000 225000 185000 250000 280000 200000