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MANAGEMENT AND COST ACCOUNTING MRB1022/MRC1023 Group Assignment – Case 5 AUBURN CIRCULAR CLUB PRO RODEO ROUNDUP AUBURN CIRCULAR CLUB PRO RODEO ROUNDUP 1. Yes, it was necessary for Shelley Jones to stipulate that she wanted a fund-raiser. Reasons: 1. Become the target / KPI for the fund raised. 2. Auburn Circular Club will be recognised by the community. 3. Contribution for the community. 4. Sense of responsibility for fund-raiser. 5. Ensure continuity of the rodeo event for future year with sufficient fund. . What Jonathan Edmunds meant was lost in the year event of $8,326 would contribute as amount invested to build the image of Auburn Circular Club. 3. Yes, Jonathan’s comment is consistent with Shelley’s idea that the club should have a fund-raiser because it was the first year event and hoping that it will get better next year. 4. The rodeo expenditures showed that the expenses were three times more than collection on ticket sales. 5. Variable Cost of the catering cost using high-low method is $8. 5 per contestant and the fixed cost is $403 as shown in the calculations below: Variable Cost i) Total Cost i. = $1243 – $998 = $245 ii) Contestants ii. =96 – 68 = 28 iii) Variable Cost per contestant iii. =245/28 = $8. 75 Fixed Cost | High| Low| Total Cost| $1243| $998| Less Variable Cost| = 99 x 8. 75=$840| = 68 x 8. 75= $595| Fixed Cost| $403| $403| 6. The committee should take the following steps to make the rodeo profitable : i. Review the expenses incurred in previous year rodeo event to avoid unnecessary expenses. ii.
Look for quotation from other life stock contractor to get the cheaper price. iii. Ticket must be dated to avoid re-used of ticket by other individual. 7. Break-even point in dollars of ticket sales Contribution Margin = Gross sales- variable Costs 100% – 4% = 96% BEP in dollar = Fixed cost = 51,000 = $53,125 CM 96% 8. (a) Dollars of ticket sales needed = Fixed cost + Target Net Income / CM 51,000 + 6,000 / 96% = $59,375 = $59,375 – Revenue from sponsor = $59,375 – $25,600 = $33,775 (b) Dollars of ticket sales needed = Fixed cost + Target Net Income / CM 1,000 + 12,000 / 96% = $65,625 = Required Gross Receipt – Revenue from sponsor = $65,625 – $25,600 = $40,025 9. By assuming the average price of the ticket $8 ($8+$10+$6+$8 / 4) Attendance = $33,773 / $8 = 4,222 patrons The event was held for 3 days, attendance for one day = 4,222 / 3 = 1,407 patrons Since the arena could hold 2,500 patrons, the facilities at the fairgrounds are adequate to handle crowds. 10. Auburn Circular Club Budgeted Income Statements for year 2 Receipt Contribution from sponsor$25,600 Receipt from ticket sales$65,625 Total receipt$91,225
Expenses Livestock contractor$26,000 Prize money$21,000 Sponsor signs for arena$ 2,211 ($1,900 x 116. 364%) Insurance$ 600 Ticket printing$ 525 ($1,050 x 50%) Sanctioning fees$ 925 Entertainment$ 859 Judging fees$ 750 Rent$ 600 Utilities$ 300 Interest expense$ 300 Miscellaneous Fixed cost$ 100 Total expenses$53,870 11. The expenses are not related to Shelley purchases of rodeo clothing relevant cost. Why? This is because the expenses by Shelley’s are personal expenses and not related to the club expenses. 2. Incremental Analysis – To hire or to cater for Contestant Hospitality Tent Relevant info: 1. Major sponsor spot amounting to $600 each given to 2 suppliers in exchange for the catering and tent 2. Major sponsor sign cost at $48 each Details| Hire| Cater| Net incomeIncrease/(Decrease)| Hospitality Tent| 3,341| 0| 3,341| Opportunity Cost| 1,200| 0| 1,200| Sponsor sign| 0| 96| (96)| TOTAL COST| 5,341| 96| 5,245| Based on the above computation, the club has to source out it hospitality tent as net income increase by $5,245.