Hello. I need to answer the following questions for the case provided for a group roundup discussion. I appreciate all your help with this.

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Case 5 Auburn Circular Club Pro Rodeo Roundup Developed by Jessica Johnson Frazier, Eastern Kentucky University, and Patricia H. Mounce, University of Central Arkansas The Business Situation When Shelley Jones became president-elect of the Circular Club of Auburn, Kansas, she was asked to suggest a new fundraising activity for the club. After a considerable amount of research, Shelley proposed that the Circular Club sponsor a professional rodeo. In her presentation to the club, Shelley said that she wanted a fundraiser that would (1) continue to get better each year, (2) give back to the community, and (3) provide the club a presence in the community. Shelley's goal was to have an activity that would become an \"annual community event\" and that would break even the first year and raise $5,000 the following year. In addition, based on the experience of other communities, Shelley believed that a rodeo could grow in popularity so that the club would eventually earn an average of $20,000 annually. A rodeo committee was formed. Shelley contacted the world's oldest and largest rodeo-sanctioning agency to apply to sponsor a professional rodeo. The sanctioning agency requires a rodeo to consist of the following five events: Bareback Riding, Bronco Riding, Steer Wrestling, Bull Riding, and Calf Roping. Because there were a number of team ropers in the area and because they wanted to include females in the competition, members of the rodeo committee added Team Roping and Women's Barrels. Prize money of $3,000 would be paid to winners in each of the seven events. Members of the rodeo committee contracted with RJ Cattle Company, a livestock contractor on the rodeo circuit, to provide bucking stock, fencing, and chutes. Realizing that costs associated with the rodeo were tremendous and that ticket sales would probably not be sufficient to cover the costs, the rodeo committee sent letters to local businesses soliciting contributions in exchange for various sponsorships. Exhibiting Sponsors would contribute $1,000 to exhibit their products or services, while Major Sponsors would contribute $600. Chute Sponsors would contribute $500 to have the name of their business on one of the six bucking chutes. For a contribution of $100, individuals would be included in a Friends of Rodeo list found in the rodeo programs. At each performance the rodeo announcer would repeatedly mention the names of the businesses and individuals at each level of sponsorship. In addition, large signs and banners with the names of the businesses of the Exhibiting Sponsors, Major Sponsors, and Chute Sponsors were to be displayed prominently in the arena. CA-16 CA-17 case 5 Cases for Management Decision-Making A local youth group was contacted to provide concessions to the public and divide the profits with the Circular Club. The Auburn Circular Club Pro Rodeo Roundup would be held on June 1, 2, and 3. The cost of an adult ticket was set at $8 in advance or $10 at the gate; the cost of a ticket for a child 12 or younger was set at $6 in advance or $8 at the gate. Tickets were not date-specific. Rather, one ticket would admit an individual to one performance of his or her choice Friday, Saturday, or Sunday. The rodeo committee was able to secure a location through the county supervisors board at a nominal cost to the Circular Club. The arrangement allowed the use of the county fair grounds and arena for a one-week period. Several months prior to the rodeo, members of the rodeo committee had been assured that bleachers at the arena would hold 2,500 patrons. On Saturday night, paid attendance was 1,663, but all seats were filled due to poor gate controls. Attendance was 898 Friday and 769 on Sunday. The following revenue and expense figures relate to the first year of the rodeo. Illustration CA 5-1 Revenue and expense data, year 1 Receipts Contributions from sponsors Receipts from ticket sales Share of concession profits Sale of programs $22,000 28,971 1,513 600 Total receipts $53,084 Expenses Livestock contractor Prize money Contestant hospitality Sponsor signs for arena Insurance Ticket printing Sanctioning fees Entertainment Judging fees Port-a-potties Rent Hay for horses Programs Western hats to first 500 children Hotel rooms for stock contractor Utilities Sand for arena Miscellaneous fixed costs Total expenses 26,000 21,000 3,341* 1,900 1,800 1,050 925 859 750 716 600 538 500 450 325 300 251 105 61,410 Net loss $ (8,326) *The club contracted with a local caterer to provide a tent and food for the contestants. The cost of the food was contingent on the number of contestants each evening. Information concerning the number of contestants and the costs incurred are as follows: Friday Saturday Sunday Contestants Total Cost 68 96 83 $ 998 1,243 1,100 $3,341 On Wednesday after the rodeo, members of the rodeo committee met to discuss and critique the rodeo. Jonathan Edmunds, CPA and President of the Circular Club, commented that the club did not lose money. Rather, Jonathan said, \"The club made an investment in the rodeo.\" CA-18 case 5 Cases for Management Decision-Making Instructions Answer each of the following questions. 1. Do you think it was necessary for Shelley Jones to stipulate that she wanted a fundraiser that would (1) continue to get better each year, (2) give back to the community, and (3) provide the club a presence in the community? Why or why not? 2. What did Jonathan Edmunds mean when he said the club had made an investment in the rodeo? 3. Is Jonathan's comment concerning the investment consistent with Shelley's idea that the club should have a fundraiser that would (1) continue to get better each year, (2) give back to the community, and (3) provide the club a presence in the community? Why or why not? 4. What do you believe is the behavior of the rodeo expenditures in relation to ticket sales? 5. Determine the fixed and variable cost components of the catering costs using the highlow method. 6. Assume you are elected chair of the rodeo committee for next year. What steps would you suggest the committee take to make the rodeo profitable? 7. Shelley, Jonathan, and Adrian Stein, the Fundraising Chairperson, are beginning to make plans for next year's rodeo. Shelley believes that by negotiating with local feed stores, innkeepers, and other business owners, costs can be cut dramatically. Jonathan agrees. After carefully analyzing costs, Jonathan has estimated that the fixed expenses can be pared to approximately $51,000. In addition, Jonathan estimates that variable costs are 4% of total gross receipts. After talking with business owners who attended the rodeo, Adrian is confident that funds solicited from sponsors will increase. Adrian is comfortable in budgeting revenue from sponsors at $25,600. The local youth group is unwilling to provide concessions to the audience unless they receive all of the profits. Not having the personnel to staff the concession booth, members of the Circular Club reluctantly agree to let the youth group have 100% of the profits from the concessions. In addition, members of the rodeo committee, recognizing that the net income from programs was only $100, decide not to sell rodeo programs next year. Compute the break-even point in dollars of ticket sales assuming Adrian and Jonathan are correct in their assumptions. 8. Shelley has just learned that you are calculating the break-even point in dollars of ticket sales. She is still convinced that the Club can make a profit using the assumptions in number 7 above. (a) Calculate the dollars of ticket sales needed in order to earn a target profit of $6,000. (b) Calculate the dollars of ticket sales needed in order to earn a target profit of $12,000. 9. Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues calculated in number 8 above to earn a $6,000 profit? Show calculations to support your answers. 10. Prepare a budgeted income statement for next year using the estimated revenues from sponsors and other assumptions in number 7 above. In addition, use ticket sales based on the target profit of $12,000 estimated in 8(b). The cost of the livestock contractor, prize money, sanctioning fees, entertainment, judging fees, rent, and utilities will remain the same next year. Changes in expenses include the following: Members of the Club have decided to eliminate all costs related to contestant hospitality by soliciting a tent and food for the contestants and taking care of the \"Contestant Hospitality Tent\" themselves. The county has installed permanent restrooms at the arena, eliminating the need to rent port-apotties. The rodeo committee intends to pursue arrangements to have hotel rooms, hay, and children's hats provided at no charge in exchange for sponsorships. The cost of banners varies with the number of sponsors. Signs and More charged the Circular Club $130 for each Exhibiting Sponsor banner and $48 for each Major Sponsor banner. At this time there is no way to know whether additional sponsors will be Exhibiting Sponsors or Major Sponsors. Therefore, for budgeting purposes you should increase the cost of the banners by the percentage increase in sponsor contributions. (Hint: Round case 5 Cases for Management Decision-Making all calculations to three decimal places.) By checking prices, the Circular Club will be able to obtain insurance providing essentially the same amount of coverage as this year for only $600. For the first rodeo the Club ordered 10,000 tickets. Realizing the constraints on available seating, the Club is ordering only 5,000 tickets for next year, and therefore its costs are reduced 50%. The sand for the arena for next year will be $300, and miscellaneous fixed costs are to be budgeted at $100. 11. A few members in the Circular Club do not want to continue with the annual rodeo. However, Shelley is insistent that the Club must continue to conduct the rodeo as an annual fundraiser. Shelley argues that she has spent hundreds of dollars on western boots, hats, and other items of clothing to wear to the rodeo. Are the expenses related to Shelley's purchases of rodeo clothing relevant costs? Why or why not? 12. Rather than hire the local catering company to cater the Contestant Hospitality Tent, members of the Circular Club are considering asking Shady's Bar-B-Q to cater the event in exchange for a $600 Major Sponsor spot. In addition, The Fun Shop, a local party supply business, will be asked to donate a tent to use for the event. The Fun Shop will also be given a $600 Major Sponsor spot. Several members of the Club are opposed to this consideration, arguing that the two Major Sponsor spots will take away from the money to be earned through other sponsors. Adrian Stein has explained to the members that the Major Sponsor signs for the arena cost only $48 each. In addition, there is more than enough room to display two additional sponsor signs. What would you encourage the Club to do concerning the Contestant Hospitality Tent? Would your answer be different if the arena were limited in the number of additional signs that could be displayed? What kind of cost would we consider in this situation that would not be found on a financial statement? CA-19 Auburn Circular Club Pro Rodeo Roundup 1) Do you think it was necessary for Shelly Jones to stipulate that she wanted a fundraiser that would (1) continue to get better each year, (2) give back to the community, and (3) provide the club a presence in the community? Why or Why not? I think it was a good idea for Shelly to set such goals for the fundraising event because everyone needs a goal to pursue and you have to have a standard by which you measure the progress of your activities in order to assess your achievement and to know where you stand. I think that the three things mentioned above are honorable goals. 2) What did Jonathan Edmunds mean when he said that the club had made an investment in the rodeo? What he meant when he said that the club had made an investment in the rodeo is that it would pay off down the road in more ways that one. He also meant that he could see it becoming profitable with a little work. It was a good investment. 3) Is Jonathan's comment consistent with Shelly's idea that the club should have a fundraiser [with the three aforementioned qualities]? Why or why not? Yes, Jonathan's comment is consistent with Shelly's idea because that is part of what he was meaning by his statement about the club's investment in the rodeo. Not only could he see it becoming profitable, but he also was looking at it from the perspective that it was benefiting the community and that, in the long run, would be something that the club would be known for. 4) What do you believe is the behavior of rodeo expenditures in relation to ticket sales? I believe that there is definitely some correlation between rodeo expenditures and ticket sales. For one thing, the more promotional features of the rodeo, the more people will probably want to come. Of course, those promotions cost money. Also, I believe that the club has a lot of leeway when it comes to expenditures because of their sponsor banners, which bring in revenue without ticket sales. I would have t say that there are not a lot of expenditures that have a direct relationship to the sales of tickets. 5) Determine the fixed and variable cost components of the catering costs using the high-low method. High Low $1,243 $998 96 68 Variable cost per unit Change $245 28 $8.75 Total cost Less: Variable costs 96 x 8.75 68 x 8.75 Total fixed costs Activity Level High Low $1,243 $998 $840 $403 $595 $403 From the above table you can see that the fixed cost component of the catering costs is $403, and the variable cost component is $8.75 per contestant. 6) Assume you are elected chair of the rodeo committee for next year. What steps would you suggest the committee take to make the rodeo profitable? Well, for one thing, I would suggest getting more seats somehow and then trying to promote the rodeo more so that more people come. One way to do that would be to raffle something cool like an ipod or a digital camera or something. I think that would draw more people. However, there is no sense in trying to get more people to come if they are not going to have anywhere to sit, so they better put in more seats. 7) [A careful analysis of the costs produced the following information for next year: Jonathan has estimated that the fixed expenses can be pared to approximately $51,000. In addition, Jonathan has determined that variable costs are 4% of total gross receipts. Revenue from sponsors can be comfortably budgeted at $25,600. The youth group will not share the profits with the club anymore. Finally, they will no longer sell rodeo programs.] Compute the break-even point in dollars of ticket sales assuming that the above analyses are correct. Receipts Contributions from sponsors Receipts from ticket sales Total Receipts Fixed costs Variable costs Total Costs Profit/(Loss) $25,600 $27,525 $53,125 $51,000 $2,125 $53,125 $0 As you can see from the above table constructed in Excel, the break-even point in dollars of ticket sales, assuming the preceding analyses are correct, is $27,525. 8) Shelly has just learned that you are calculating the break-even point in ticket sales. She is still convinced that the club can make a profit using the assumptions in number 7 above. (a) Calculate the dollars of ticket sales needed in order to earn a target profit of $6,000. Receipts Contributions from sponsors Receipts from ticket sales Total Receipts Fixed costs Variable costs Total Costs Profit/(Loss) $25,600 $33,775 $59,375 $51,000 $2,375 $53,375 $6,000 As the above table shows, in order to earn a target profit of $6,000, ticket sales, in dollars, must be $33,775. (b) Calculate the dollars of ticket sales needed in order to earn a target profit of $12,000. Receipts Contributions from sponsors Receipts from ticket sales Total Receipts Fixed costs Variable costs Total Costs Profit/(Loss) $25,600 $40,025 $65,625 $51,000 $2,625 $53,625 $12,000 Here the above table shows us that in order to earn a target profit of $12,000, $40,025 in ticket sales are needed. 9) Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues calculated in number 8 above to earn a $6,000 profit? Show calculations to support your answers. Well, considering that there are no stipulations as to the ratio of adults and children and since the child's price at the door is $8 and the adult advanced ticket also costs $8, we will assume that 40% of ticket sales are for $10 tickets, approximately 39% are for $8 tickets, and approximately 21% are for $6 tickets. This will allow us to calculate an approximate necessary capacity. Dollars # of Tickets $10 Tickets $13,510 1,351 $8 Tickets $13,216 1,652 $6 Tickets $7,056 1,176 Total Sales $33,782 In order to get an even number of tickets for each category, I rounded up the dollar amounts and the above table was produced. This shows that there might be enough room, if there are roughly the same amount of people every night, however, this is not a perfect world where things happen the way we want them to. Thus, they will probably need to acquire more adequate seating and facilities large enough to handle the number of attendants they need. 10) Prepare a budgeted income statement for next year using the estimated revenues from sponsors and other assumptions n number 7. In addition, use ticket sales based on a target profit of $12,000 estimated in 8(b). The cost of the livestock contractor, prize money, sanctioning fees, entertainment, judging fees, rent, and utilities will remain the same next year. [There are the following changes in expenses: all costs related to contestant hospitality will be eliminated. There will be no need to rent port-a-potties. There will be arrangements to have hotel rooms, hay and sand, and children's hats provided at no charge in exchange for a sponsor's banner. For budgeting purposes you should increase the cost of the banners by the percentage increase in sponsor contributions. (Round to 3 decimals). Insurance will be obtained for $600. They are ordering half the amount of tickets, 5,000, thus ticket costs are reduced by 50%. Interest expense for next year will be $300 and miscellaneous fixed costs are to be budgeted at $100.] AUBURN CIRCULAR CLUB Budgeted Income Statement For Next Year's Rodeo (Not sure dates) Sales Cost of Goods Sold Gross Profit Selling and administrative expenses Income from operations Interest Expense Net income $65,625.00 $53,269.91 $12,355.09 $ 600.00 $11,755.09 $ 300.00 $11,455.09 The above table is a budgeted income statement for next year's rodeo. The only item that I included in selling and administrative expenses was the insurance. The net income for next year's rodeo, if all of the assumptions in number 7 are correct, and if they sell $40,025 worth of tickets, will be $11,455.09. The reason why it will not be $12,000 is because their total expenses are actually greater that $51,000, which was given in number 7. Therefore the above income statement was produced. 11) A few members in the circular club do not want to continue with the annual rodeo. However, Shelly is insistent that the club must continue to conduct the rodeo as an annual fundraiser. Shelly argues that she has spent hundreds of dollars on clothing to wear to the rodeo. Are the expenses related to Shelly's purchases of rodeo clothing relevant costs? Why or why not? Well, that is actually a stupid question because Shelly's having bought new clothing has absolutely no relevance to whether or not the rodeo will be profitable. However, it may be relevant to her and her friends, but not to the club. 12) Rather than hire the local catering company to cater the Contestant Hospitality Tent, members of the Circular Club are asking Shady's Bar-B-Q to cater the event in exchange for a $600 Major Sponsor spot. In addition, the Fun Shop, a local party supply business, will be asked to donate a tent to use for the event, also in exchange for a $600 Major Sponsor Spot. The Major Sponsor signs for the arena cost $48 each, and there is more than enough room to display the additional banners. Some members, however, think that this will take away from other sponsors. What would you encourage the club to do concerning the contestant hospitality tent? Would your answer be different if the arena were limited in the number of additional signs that could be displayed? What kind of cost would we consider in this situation that would not be found on a financial statement? I would certainly encourage the club to get the catering for the Hospitality tent in exchange for the sponsor banner because it is definitely worth it to essentially be paying only $48 for catering for three days, however I do not know how much a tent would cost to rent for three days outright, but if it is more than $48, then of course they should do it. However, if there were limited space for signs, then I would say that unless the tent rental costs $600 or more, then it would not be worth it because they would be sacrificing revenue that could be made from the sale of the banners, which would more than pay for the tent. Furthermore, even if there were limited space for the banners, unless the catering would cost less than $600 for the three days, then they should definitely get that in exchange for a banner which will only cost $48