Hostingof the event performance requires consideration of the total costimplications and the anticipated revenue collection in the event tohelp in gauging the viability of the event. Profitability is analyzedregarding the ratio of the cost required to support the event fully.In this case, some of the costs involved in the hosting of the eventinclude rental of the auditorium, compensation of the dancers,administrative staffs cost, insurance, marketing and payment of themusicians. Other costs involved include the purchase of the costumes,royalties, rehearsals, guest artist fees and the choreography amongothers(Li, 2015).
Totalcost required in the hosting of the event
Theestimation of the costs that will be encountered in the event hostingadds up to a total of about $836,000. The cost involves both thefixed cost and variable costs. Variable costs are costs that varydepending on the event hosted, and the number of performers involvedand the total cost sums up to 68,000. The cost estimate included theexpenses on the renting of the auditorium, dancers costs and musiciancosts. Other costs likely to be incurred include the marketing,insurance and the general office expenses. On the other hand, thevalue of total fixed cost for the four performances is $253,000 withmost of the cost incurred in jazz and tap dance and the modern dancewhich will cost $88,000 and $ 95,000 respectively.
Themain source of revenue in the hosting of the event lies in thepayment from the tickets that will be sold to the audience. Theseating capacity in the lower orchestra is 150 and 450 seats in theupper orchestra. The anticipated attendance in the lower orchestra is100% while that of the upper orchestra is variable depending on theperformance with only charismas spectacular having 100%. Based on thehall capacity, the expected revenue collection is about $ 134, 625when each ticket goes for $150.
Thevalue of an event is determined by the differences between therevenue and cost incurred in the management of the event. Thecontribution margin in the hosting of the four performances is$66,625 which is lesser than then total fixed cost. Profit iscalculated by subtracting the total costs, including both variableand fixed, from the revenue generated. The total segment margin, inthis case, will be negative assuming that only the estimated peopleattend the event and thus the outcome will be a loss. From thecalculations in the Excel file, the total cost surpasses the revenueanticipated by a great margin, and this indicates the magnitude ofloss likely to be incurred(DRURY, 2013).
Thebreak-even value in the holding of the performance is 836,000, andtherefore, this is the minimum amount that should be raised from theevent. Raising of the funds may require an increase in the number oftickets sold or else, increasing the ticket price to ensuresustainability in the whole process. On the other hand, othervariable costs can be minimized for example by reducing the number ofperformers, musicians, and dancers in each category.
DRURY,C. M. (2013). Managementand cost accounting.Springer.
Li,X. (2015). conservatism and the cost of capital: Aninternational analysis. Journalof Business Finance & , 42(5-6),555-582.