Question

1. Prepare a budgeted income statement for next year using the estimated revenues from sponsors and other assumptions in number 7 above. In addition, use ticket sales based on the target profit of $12,000 estimated in 8(b). The cost of the livestock contractor, prize money, sanctioning fees, entertainment, judging fees, rent, and utilities will remain the same next year. Changes in expenses include the following: Members of the Club have decided to eliminate all costs related to contestant hospitality by soliciting a tent and food for the contestants and taking care of the “Contestant Hospitality Tent” themselves. The county has installed permanent restrooms at the arena, eliminating the need to rent port-a-potties. The rodeo committee intends to pursue arrangements to have hotel rooms, hay, and children’s hats provided at no charge in exchange for sponsorships. The cost of banners varies with the number of sponsors. Signs and More charged the Circular Club $130 for each Exhibiting Sponsor banner and $48 for each Major Sponsor banner. At this time there is no way to know whether additional sponsors will be Exhibiting Sponsors or Major Sponsors. Therefore, for budgeting purposes you should increase the cost of the banners by the percentage increase in sponsor contributions. (Hint: Round all calculations to three decimal places.) By checking prices, the Circular Club will be able to obtain insurance providing essentially the same amount of coverage as this year for only $600. For the fi rst rodeo the Club ordered 10,000 tickets. Realizing the constraints on available seating, the Club is ordering only 5,000 tickets for next year, and therefore its costs are reduced 50%. The sand for the arena for next year will be $300, and miscellaneous fi xed costs are to be budgeted at $100.

Answer to 7-

Variable cost is 4% of gross receipts. Contribution margin = 100%-4% = 96%

Given fixed cost = $51,000
Breakeven in dollars = 51,000/96% = 51,000*100/96 = $53,125

Answer to 8b-

(b)   Dollars of ticket sale needed in order to earn a target profit of $12 = $51,000 + $12,000/96% = $65,625

Dollar of ticket sale needed = 65,625 - 25,600= $40,025

Answer 1

solution :

BUDGETED INCOME STATEMENT

PARTICULARS	AMOUNT($)
REVENUE:
sponsors	25,600
Ticket Sales at Target Profit of $12,000	40,025
TOTAL SALES(A)	65,625
EXPENSES:
variable cost (65,625 x 4%)	2,625
Fixed Expenses	51,000
Exhibiting Sponsor banner	130
Major Sponsor banner	48
insuarnce	600
sand	300
Misc. Fixed cost	100
Total Expenses(B)	54,803
NET PROFIT(A-B)	10,822

EXPLANATION

given that

Braek even sales ($) = $53,125

variable cost = 4%

fixed cost = $51,000

Budgeted receipt from ticket sale ($) =$40025

TOTAL SALES ($) =$65,625

so Budgeted Gross receipts Sponsor($) = $65,625 -$40025 =  $25,600

Hence, Budgeted Ticket Sales should be $40,025 to earn target profit of $12,000

Disclaimer - For the Above part, question is unclear about various facts like Cost of tickets ordered, percentage increase in sponsor for determining banner costs, etc. Therefore,Above solution is solely based on my assumptions.

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