Question
The Warsaw Air Show A group of community enthusiasts think that an air show would be a positive event for Warsaw, Indiana and greater Kosciusko
The Warsaw Air Show A group of community enthusiasts think that an air show would be a positive event for Warsaw, Indiana and greater Kosciusko County. The goal was an annual air show that would improve with each passing year and add value to the community. Financially, the objective was to break even in the first year and earn $10,000 in the second year. Once up and running, the goal was to earn an average of $25,000 per year. The annual surpluses would be available to reinvest in the air show and support other community activities. The original group of enthusiasts added strategically to their number and formed an air show committee. The committee quickly determined that 1) appearance fees would be necessary to attract desirable aircraft, 2) parking and entry fees would be insufficient to cover the air show costs, and 3) thus, funds would have to be raised through sponsorships. Sponsorship levels were set at $100, $1,000, $2,000 and $5,000. A local civic group agreed to provide concessions. Profits from the concessions will be split evenly between the air show and civic group. The air show will take place on the third weekend in August, starting on Friday evening and ending on Sunday afternoon. Entry fees are $10 for adults and $5 for children 12-and-younger. Parking fees are $5 per vehicle. During the first year of the air show attendance and parking were as follows: Vehicles Parked Adult Admissions Children Admissions Friday 800 1,000 225 Saturday 1,750 2,450 1,100 Sunday 625 775 180 Total 3,175 4,225 1,505 Below are revenue and expense figures for the first year of the air show: Revenues Sponsor contributions $30,000 Parking fees 15,875 Entry fees 49,775 Concessions 4,200 Total revenues $99,850 Expenses Appearance fees $35,000 Meals and lodging 7,200 Advertising 4,900 Insurance 8,250 Rent 9,300 Sanitation 5,100 Fuel 11,350 Printing 3,200 Parking and traffic control 7,800 Cleanup 4,350 Miscellaneous 2,950 Total expenses 99,400 Surplus $450 Answer the following questions: 1. Was it necessary to formulate objectives for the air show? Why or why not? 2. The year one surplus was relatively small, though it was larger than the breakeven target for year one. Would your assessment of year one have been different had the result been a small deficit? Why or why not? 3. How do air show expenditures relate to ticket sales for the air show? What costs would you label as variable, as fixed, or as mixed?
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