Shelley, Jonathan, and Adrian Stein, the Fundraising Chairperson, are beginning to make plans for next year’s rodeo. Shelley believes by negotiating with local feed stores, inn- keepers, and other business owners, costs can be cut dramatically. Jonathan agrees. After carefully analyzing costs, Jonathan has estimated the fixed expenses can be pared to approximately $51,000. In addition, Jonathan estimates variable costs are 4% of total gross receipts. After talking with business owners who attended the rodeo, Adrian is confident the 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 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.
Watch this video, Revenue, Profits, and Price: Crash Course Economics #24, to help you prepare for this week’s discussion.
Use the company for which you currently work, a business with which you’re familiar, or the dream business you want to start to reply to these prompts:
- Do you think it’s easy for your selected business to enter this same industry?
- What are some key fixed, variable, implicit, and/or opportunity costs?
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