Prepared by: Jalotjot, Reyes, Subang Central Issue: How to guarantee that the various support activities generate revenue? Areas of Consideration: * Marketing/Finance/Human Resource * Items Available/Pricing/Variable Cost/Revenue Distribution Item| Price/Unit| Variable Cost| Revenue| Soft Drink| $1. 50| $0. 75| 25%| Coffee| $2. 00| $0. 50| 25%| Hotdogs| $2. 00| $0. 80| 20%| Hamburgers| $2. 50| $1. 00| 20%| Misc. Snacks| $1. 00| $0. 40| 10%| * Fixed Costs (per game) * Salaries for Food Services$20,000 Stadium Space$4,800 * Vendors$1,260 Analysis: 1. Break-Even Points (per item) The table above shows the list of break-even points per item. These are the number of units needed to cover up the costs per game. 2. Realistic Sales Estimates (sales per attendee) The table above shows the number of units that an individual customer needs to purchase per game to reach the break-even point depending on the number of attendees. The equivalent dollar values suggest the specific amount of money that the attendees need to spend for food to cover up the expenses.
The graphs above show the behavior of the values in the table. They suggest smooth curves which represent the break-even line. Therefore, falling below the curves denotes a loss while falling above them means profit. Furthermore, to ensure no loss, points must fall on or above the line. Alternative Courses of Action: * Provide meal combos * Apply discounts, e. g. , hamburger and soft drink combo. In total, they originally cost $4. 00. Marking down the price, for example, to $3. 50 may attract customers.
Applying discounts may decrease the profit margin of the items but, somehow, this ensures sales. * Integrate freebies on tickets * Incorporate the “needed” amount of purchase per customer. This means that the starting value of tickets must be the break-even value. For example, if the break-even value is at $1. 50 per customer, pricing of tickets must be based on this. Furthermore, a free soft drink, which costs $1. 50, may be integrated. * Intensify marketing * Some vendors must be roaming around the vicinity to become accessible to the attendees.
Avoid being stagnant in one location to ensure sales. Recommendation: * Integrate freebies on tickets * From the Sales Estimates table, if the attendance remained at 27,000, the break-even point is at $1. 61 per customer. Therefore, to ensure that the customers will really spend this amount of cash, a ticketing system may be applied. The ticket may include stubs of free food/drink to further satisfy the attendees. In this case, since the closest amount to $1. 61 is the price of a soft drink, the stadium may make soft drinks as freebies.