DADELAND MUSEUM

In $1928,$ Cyrus P$.$ Dade, a Southern railroad owner, established an endowment to fund the Dadeland Museum in Dade City. Whereas the museum currently has a $30-$million$-$dollar endowment, it also has substantial operating costs and continues to add to its eclectic collection that encompasses paintings, photographs, drawings, and design objects post$-1900.$ Annual earnings from the endowment $($approximately $$2,100,000$ in $2023)$ are not sufficient to cover operations and acquisitions, and the museum$$s trustees and president are conscious of the need to generate income from admissions, special exhibits, and museum store sales.

Joe Morgan, photographic curator, is in the process of planning an exhibition of O$.$ Winston Link photographs, which will run from September through November of $2024.$ Below is a preliminary budget, prepared by Spencer, of revenue and costs associated with the exhibition:

Note

Revenue $(10,000$ x $$15)$ $$150,0001$

Less:

Lease of photographs from other

museums and collectors $$89,0002$

Packing and transportation of

photographs from collectors $5,0003$

Event insurance $6,0004$

Joe Morgan salary $(25\%)22,0005$

William Jacobs salary $(25\%)12,5006$

Guard service $15,0007$

Installation costs $4,0008$

Advertising $5,0009$

Exhibition printed programs $3,000159,50010$

Profit $($loss$)($$$9,500)$

$$

Notes

$1.$ Estimated attendance is $10,000$ and admission to the exhibit is $$15.$

$2.$ Some photographs will come from the Dadeland collection while others will be leased from other museums and collectors.

$3.$ Cost of packing transportation to and from the Dadeland Museum.

$4.$ Insurance to cover photographs during the run of the exhibition.

$5.$ Twenty$-$five percent of annual salary for Joe Morgan, head photography curator.

$6.$ Twenty$-$five percent of annual salary for William Jacobs, assistant photography curator.

$7.$ Cost of guard service for exhibition.

$8.$ Painting of exhibition room to off$-$white background.

$9.$ Advertising in newspapers and public radio.

$10.$ Cost of programs describing the work of O$.$ Winston Link and pictures at exhibition.

Additional information

In preparing the budget, Joe assigned $25$ percent of his and his assistant$$s annual salaries to the exhibition since they will each spend approximately three months on the project.

An admission fee of $$8$ is charged to enter the museum, and attendance at the exhibition is an additional $$15$ per person. Approximately one$-$fifth of the individuals who are estimated to attend the exhibition would have come to the museum whether or not the exhibition is being held. $($Alternatively$,$ four$-$fifths of the individuals are coming specifically to attend the exhibition.$)$

Analysis of prior data indicates that $25$ percent of visitors to the museum make a purchase at the museum store, and the average purchase price is $$8.$ The store has a $40$ percent gross margin $($sales minus cost of sales$)$ and net profit $($sales minus cost of sales minus staff salaries and other operating costs$)$ per dollar of sales of $5$ percent.

Required

a$.$ Prepare an analysis of the financial impact of the exhibition on the Dadeland Museum assuming attendance is $10,000.$

b$.$ Does offering the exhibition appear to be a good decision from a financial standpoint? Give reasons for and against having the exhibition.

c$.$ How many people must attend the exhibition for its financial impact to be project neutral $($i$.$e$.,$ the museum will be no better off nor no worse of financially?$)$

d$.$ Write a short memo to Joe Morgan explaining the errors, if any, in his calculations.