The recent success of Southwestern Universitys football program is causing SWUs president, Joel Wisner, more problems. than he faced during the teams losing era in the early 1990s. For one thing, increasing game day attendance is squeezing the town of Stephenville, Texas. Dr. Wisner once again turns to his stadium manager, Hank Maddux. This time he needs a guaranteed revenue stream to help fuel the stadium expansion. One source of income could easily be the high-profit game programs.

Selling for $5 each, programs are a tricky business. Maddux wants the programs for each game to be purchased economically. His inquiries have yielded two options. A local Stephenville printer, Sam Taylor of Quality Printing, has offered the following discount schedule for the programs and game inserts:

Program Count	Program Unit Cost	Weekly Game Detail Inserts
10,000 to 30,000	$1.80 each	$0.90 each
30,000 to 60,000	$1.70 each	$0.85 each
60,000 to 250,000	$1.60 each	$0.80 each
250,000 and up	$1.40 each	$0.70 each

As a second option, however, First Printing, owned by Michael Shader, an S.W.U.

alumnus in Ft. Worth, will do the job for 10% less as a favor to help the athletic department. This option will mean sending a truck to Ft. Worth to pick up each order. Maddux estimates that the cost of each trip to Ft. Worth will be $200. Maddux figures that the universitys ordering/check-writing cost is about $100. This means he will need to lease space in a storage area off-campus and transport them to and from the campus. He estimates annual holding costs at 50%.

Madduxs other major problem is he is never sure what the demand for programs will be. With the new facility, attendance could be 60,000 for each of the five home games. And two of every three people buy a program. In addition to the programs, Maddux must purchase the inserts for each game. The inserts have information about the opposing team, photos of the expected starters, and recent game statistics. The purchasing issue is the same for inserts, except inserts will be purchased separately for each game and are a total loss after the game. The carrying cost, because inserts are to be delivered just as they are needed, should be nominal; he estimates 5%. The other costs and the same discount schedule apply, but the inserts only cost half as much because they are much smaller. First Printing will give the same 10% discount on the inserts.

Discussion Questions

1. With whom should Maddux place the order for the programs and how many should he order each time?
2. With whom should Maddux place the order for the inserts and how many should he order each time?
3. What is Madduxs total cost for programs with inserts for the season?
4. Compute the actual total program cost with First Printing. Explain and use the quantity discount model
5. Compute the theoretical solution of 60,000 per order from First Printing
6. Compute the theoretical solution for insert purchase

7. Compute the actual total insert cost with First Printing. Explain and use the quantity discount model