Friday, February 22, 2019
Cost and Southwestern University Essay
Southwestern University (SWU), located 30 miles southwest of the Dallas/Fort Worth metroplex, has witnessed tremendous growth in its football program (see Southwestern University A, in Chapter 4). With that growth, fueled by the hiring of legendary coach-and-four Bo Pitterno, has come more fame, the need for a bigger bowling ball, and more complaints rough seating, parking, long lines, and concession stand prices (see Southwestern University C, in Chapter 6). Southwestern Universitys president, Dr. Joel Wisner, was not only concerned somewhat the cost of expanding the existing stadium versus building a new stadium, but also about the adjunct activities.He wants to be sure that these various support activities generate tax income adequate to pay for themselves. Consequently, he wants the parking lots, game programs, and regimen usefulness to all be handled as profit centers. At a modern meeting discussing the new stadium, Wisner told the stadium manager, Hank Maddux, to devel op a break-even chart and colligate data for distributively of the centers. He instructed Maddux to have the food service subject break-even report ready for the next meeting. After discussion with other zeal managers and his subordinates, Maddux developed the table below. This table shows the expected percent of revenue by item, the suggested selling prices, and his estimate of variable costs.Item SellingPrice/whole VariableCost/Unit SalesUnits Soft drink $1.50 $ .75 10000 cocoa 2.00 .50 5000 Hot dogs 2.00 .80 2000Hamburgers 2.50 1.00 5000Misc. snacks 1.00 .40 3000Madduxs fixed costs are interesting. He estimated that the prorated atom of the stadium cost would be salaries for food services at $100,000 ($20,000 for all(prenominal) of the five home games) 2,400 square feet of stadium space at $2 per square foot per game and six people in each of the six booths for 5 hours at $7 an hour.Maddux wants to be sure that he has a number of things for President Wisne r (1) break-even point in dollars for all food sales (2) realistic sales estimates (for instance, he wants to know how many dollars each attendee is spending on each food item at his projected break-even if attendance grows to 70,000) (3) what sales per attendee would be if attendance remained about 27,000 and (4) what his unit sales would be at break-even, that is, what are his sales of fruity drinks, coffee, hot dogs, and hamburgers. He felt this latter information would be laborsaving to understand how realistic the assumptions of his model are.