Here is the textbook you will need to source from:https://open.lib.umn.edu/exploringbusiness/
Please use other resources as well and be sure to cite all.
Microsoft Word - Financial Analysis Case Study.docx IntroductiontoBusiness Prof.HannahWeiser Let’sThrowaBusinessParty! Acasestudytolearnhowtoprojectsales,researchandestimateexpenses,andtocalculateprojectedprofit/loss. Thisanalysiswillincludethedevelopmentofanincomestatementandstudentswillconductabreakevenanalysis. Theprojectwillrequireyoutomakeaprofitablepartyplanasabusiness consultant,determiningwhetherthepartyisfinanciallyviable.Pleasebe suretoreviewtheassignmenttodeterminetherequirements.To determinewhetheryourideaforapartyispractical,youwillneedto researchthecostsofpartyfindingcostsintheindustryandsimilarparties andvenuesasawayof'benchmarking'.Youwillthenneedtothinkcritically toansweraseriesoffinancialquestionsinparagraphform(seebelow). Remember Breakeven? Forthepurposeofconductingthisanalysis,researchexpensesfortheparty.Youwillneedto determineactualsuppliersyoucanpurchasefromandactualestimatedcostsbasedonyourresearch. RemembertociteallsourcesinMLAformat! StepstobuildtheIncome Statement IncomeStatement(alsoknownasProfit/LossStatement) Step1:DeterminetheProjectedRevenue-(#ofticketssoldfortheparty multipliedbythepricechargedperticket).Youwillneedtoreviewandutilize oneofthesalesprojectionmethodsfromthePrezioverviewforFinancial Analysis. Step2:Determinethemajorexpenses(listeachtypeofexpenseandhow muchyouthinkitwillbe).Expensesshouldbelistedas“CostofGoodsSold”– theseareyourvariableexpensesforthepartythatchangebasedonthe numbersold(e.g.,food).Then,theremainingexpensesshouldbelistedas “OperatingExpenses”–theseareyourfixedexpensesforthepartythatremain thesamenomatterhowmanyticketsyousell. Step3:ProfitorLoss?Takeyourrevenueandsubtractalloftheexpenses.If thereismoneyleftover,youhaveaprofit.However,Ifyouhavenomoney leftover,andyouactuallyhavemoreexpensesthanrevenue,youarelosing money.Youmayneedtoconsidereither(1)raisingthepricechargedperticket, or(2)loweringexpenses. Youwillneedtodeterminehowmany ticketsyouwouldneedtosellatyour ticketpricetobreakeven.Remember, thebreakevenformulais: #ofticketsneededtobreakeven= fixedexpenses (pricechargingperticket-variable expenses,i.e.,thecostperticket) Then,todeterminetherevenue neededtobreakeven,justmultiplythe numberofunitsnecessarybytheprice youarechargingperticket. 2 IntroductiontoBusinessActivity Prof.HannahWeiser Answerthequestionsbelowinparagraphformat.Inordertoanswerthequestionsbelowyouwillneedto conductresearchandmakeassumptions.Pleaseclearlyindicateallassumptionsyoumakethroughoutyou answerstoeachquestionandciteanyresourcesusedusingfootnotes. (Hint:Thelecturematerialfromour financialanalysismoduleandthe4psofmarketingmodulewillbehelpfulinconductingthisanalysis).Makesure tousePICKAnalysisinpreparingyoursubmission!Yourpapershouldbe2-3pageslong,singlespaced. 1. Determinethesalespriceforatickettoyourparty.Howdidyoucometothisprice?Remembertousethe pricingstrategiesandobjectivesfromthe“pricing”sectionofourmarketingoverview,Ch.13.Youalsowill wantto“benchmark”againstyourcompetition:Whoarethreecompetitorsandwhataretheycharging?What isyourcompetitiveadvantage?Tip: Use pricing strategies and objectives from Learning Module 10 (pricing) in the text. 2. Identify,research,andestimatemajorexpensesforyourpartytocalculatewhatyouexpectthecostswillbe. Youshouldgetcreativehereaboutwhatyouneedforyourparty(e.g.,security,aband,food,etc.).Determine whetherthecostsnotedarefixed(operatingexpensesthatdonotchangenomatterhowmanyticketsare sold)orvariable(costsofgoodssold,whichchangebasedonthenumberofticketssold).(e.g.,Staplescharges $5forarolloftickets). 3. Usingthisproposedpricingstructureandexpensesforthefirstyear,calculatethebreakevenpoint-the numberofticketsyouneedtoselltobreakevenandtherevenueneededtobreakeven.Usethebreakeven analysisinformationfromthe“pricing”sectionofourmarketingoverview,,andtheactivityavailableunderthe correspondinglearningmodule10tohelpyouunderstandhowtoconductthisanalysis. 4. IdentifyacityandvenueforthispartyinthestateofMaryland,supportingyourchoiceusingpopulationdata (HINT:U.S.CensusBureauwebsite)andadditionalinformationthatsupportsyourreasoning. 5. Basedonyourtargetmarket,andusingsalesprojectionmethodsfromthefinancialanalysislearningmodule 12Prezioverview,projectthepotentialsales(revenue)forthisparty.Willitexceedyourbreak-evenpoint? Tip:Makesuretouseastrategyfromtheprezioverview,suchasthe“buildup”approach. 6. Usingtherevenueinformationcollectedandtheexpenseestimates,prepareanincomestatement(i.e., profit/lossstatement)tocalculatetheprojectedprofit/lossesinyearoneforthisbusiness.Tip:Learning Module12canbeusedtohelpdeterminehowtobuildanincomestatement. 7. Shouldwethrowthisparty?Whyorwhynot?Usetheanswerstotheprecedingquestionstoanswerthis question,supportingyourreasoningwiththefinancialinformationcollected. Microsoft Word - Financial Analysis Rubric.docx Name:FinancialAnalysisRubric Description:ThisrubricwillbeutilizedingradingFinancialAnalysissubmissions Doesnotmeetcriteria Meetscriteria Exceptional Reasonable estimateof SalesPricefor Tickets Points: 0(0%) Studentdoesnot determinethesalesprice foraticket. Points: 3(3%) Includessalespricebutitdoes notmeetthemajorityofthe "exceptional"criteria. Points: 5(5%) Includesreasonablesalespriceusingstrategies andobjectivesfromthecourse,citingclearlyto thecoursematerialandillustratingitsuse.Also researchesatleast3competitors'pricesasa benchmarkforpricing. Expenses clearly explainedin essay Points: 0(0%) Expensesarenot explainedinessay. Points: 15(15%) Studentmakesagoodeffort explainingsomeoftheexpenses presentedbutdoesnotmeetthe majorityofthe"exceptional" criteria. Points: 25(25%) Eachcostestimatehasbeenresearchedwith sourceincludedinfootnotesthroughoutandall majorcostsareidentifiedandclear.Any assumptionsareidentifiedandexplained. BreakEven Analysis Properly Conducted Points: 0(0%) Studentdoesnot conductbreak-even analysis. Points: 10(10%) Breakevenanalysisisconducted butisnotaccurateanddoesnot demonstrateaclear understandingofthelearning concept. Points: 15(15%) Breakevenconductedcorrectlytodetermine units/servicesneededtosellyearonetobreak evenbasedonfixedandvariableexpensesand priceofgood/servicedemonstratingaclear understandingofthislearningconcept. Location identifiedand supportedwith clearreasoning Points: 0(0%) Studentdoesnotidentify andsupportwithclear reasoningalocationand venueinMaryland. Points: 3(3%) Studentidentifiesalocationand venueforthepartyinMaryland andsupportsitwithsomedatato supporthis/herreasoning. Points: 5(5%) Studentidentifiesalocationandvenueforthe partyinMarylandandsupportsitclearlywith comprehensivedatatosupporthis/her reasoning. Sales Projections (revenue) Points: 0(0%) Studentdoesnot completesales projection. Points: 3(3%) Studentprojectsrevenuebut rationaleisnotclear. Points: 5(5%) Projectedrevenuessupportedbasedonlogical reasoningforpriceofticketandexpectedsales andexplainedclearlyinessayusingprojection methodsfromthecourse. Income Statement(not partofpage limit) Points: 0(0%) Studentdoesnotinclude incomestatement. Points: 5(5%) Studentincludesincome statementforfirstyearof businessbutitdoesnotmeetthe majorityofthe"exceptional" criteria. Points: 10(10%) Incomestatementisreasonableinitsprojections ofsalesrevenues,identificationofa comprehensiveandcompletelistofexpenses, andproperlycalculatesnetprofit/loss. UsingPICK Analysis,uses course concepts, researchand datatosupport claimsas necessary, whicharecited Points: 0(0%) Workscitedarenot included.Course conceptsarenotapplied usingPICKAnalysis. Points: 8(8%) Workscitedareincludedbutare notclearlynotedinfootnotesas required.Somecourseconcepts areapplied. Points: 15(15%) Workscitedareincludedandareclearlynoted usingfootnotesasrequired.Multiplecourse conceptsareappliedthroughoutthesubmissions usingPICKAnalysis. Doesnotmeetcriteria Meetscriteria Exceptional withfootnotes throughout Paperfreeof grammatical errors/typos Points: 0(0%) Therearemultipletypos, formatting,and/or grammarissuesinpaper. Points: 3(3%) Thereareminortypos, formatting,and/orgrammar issuesinpaper. Points: 5(5%) Therearenottypos,formatting,norgrammar issuesinpaper. Paperis organizedand hasclarity Points: 0(0%) Studentpresents informationina disorganizedandunclear manner,makingit difficulttointerpretthe informationputforth. Points: 3(3%) Thepaperissomewhatclearand concise,butnotconsistently throughoutthepaper. Points: 5(5%) Thepaperisclearandconciseconsistently throughoutitsentirety,andiswellorganized. Meetspage requirements (2fullpages, nomorethan3 excluding income statement) usingsingle spacing, 1”marginsand 12pointfont Points: 0(0%) Therearelessthan2 singlespacedsubstantive pagessubmitted. Points: 5(5%) Atleast2andnomorethan3 substantivepagessubmitted. However,pageslacksubstantive informationsufficientto comprisethe2pagerequirement (e.g.,largepictures,graphs, spacingquotestakeuptoomuch space). Points: 10(10%) Atleast2andnomorethan3substantivepages submitted.Incomestatementisnotincludedin thepagecount. Submitted timelyvia Blackboardin .docor.docx format Points: 0(0%) Notsubmittedincorrect format. Points: 0(0%) Perthesyllabus,theremaybeup toa20%gradereductionperday forlatesubmissions. Points: 0(0%) Submittedbeforerequireddeadlineandin properformat. Microsoft Word - Jazz Party FINAL Sample.doc Anonymous 1 1. The cost of a ticket to my jazz party is $59.99. I came up with this price using two pricing strategies. First I used the competitive pricing strategy, which is defined as reducing “the emphasis on price competition by matching other firms’ prices” (Boone, p. 417). Second, I used the odd pricing strategy which is defined as a “pricing method using uneven amounts,” (Boone, p. 419) so that consumers would be more likely to purchase a ticket because the cost seems less than it actually is (Boone, p. 419). In benchmarking the ticket prices of competitors, there are several competitors to for this jazz party. One competitor would be the Bethesda Blues and Jazz Supper Club which charges $20 to $50 depending on the musician for admission (“Music Calendar”, n.d., p. 1). For the purposes of this paper, I will assume the average cost is $35 for admission by taking the average of those two prices ($20+$50= $70/2= $35). It is important to note that the admissions ticket does not include food or drink costs. Based on the menu available on their website, Bethesda Blues and Jazz Supper Club charges approximately $11 for appetizers, $28 for a main course and $10 for dessert (“Dining”, n.d., pp. 1-4). Drink prices were unavailable. Another competitor would be the Blues Alley D.C. Jazz Club which charges $25 to $45 depending on the musician for admission (“Events”, n.d., p. 1). For the purposes of this paper, I will assume the average cost is $35 for admission by taking the average of those two prices ($25+$45=$70/2=$35). Food and drink are not included in that price. Based on the menu available on their website, Blues Alley D.C. charges roughly $9.50 for appetizers, $22 for a main course and $7 for dessert (“Menu”, n.d., pp. 1-6). Drink pricing is not available. A third competitor would be the Bohemian Caverns Jazz Club in D.C. which charges a standard $20 admission fee (“Tickets”, n.d., p. 1). Food and drink are not included in the admissions cost. Based on the menu available on their site, they charge $8 for appetizers, $16 for main courses and $5 for sides (“Menu”, n.d., pp. 1-5). Pricing for desserts and drinks were not available. We have several distinct competitive advantages that separate us from the competition (Boone, p. 8). One competitive advantage is that we include food and a drink in our ticket price. You don’t have to worry about additional expenses just pay your admission fee at the front door, and you are all set for a great evening. Our second competitive advantage is that we are competitively priced when you factor in both the cost of food and admission. Our three competitors charge roughly $35, $35 and $20 for admission which averages out to $30 for admission ($35+$35+$20=$90/3= $30). In addition, they charge extra for food including a main course and a dessert which averages out to $33.50 ($22+$7=29 (Bethesda Blues and Jazz Supper Club). $28+10=$38 (Blues Alley D.C. Jazz Club). So, $38+$29=$67. 67/2= $33.50). I did not include Bohemian Caverns Jazz Club for comparative food pricing since dessert pricing was not available. I assumed that a non-alcoholic beverage would cost about $3 at these competitors. All in all, $30 admissions + $3 non-alcoholic beverage + $33.50 including main course and dessert = $66.50. So $59.99, our price, is $6 less than theirs so we are competitively priced since we cost less than our competitors when you factor in food and beverages costs in addition to the admissions price. Our third competitive advantage is where we are located. We are 1 block from the Bethesda Metro Station, and there are 2 large parking garages within 1 block as well making it extremely convenient for people to come. 2. My fixed costs are those costs that remain constant regardless of the number of people who attend (Boone, p. 415). An example would be the facility I am renting the Bethesda Round House Theatre which is $350 an hour (“Facility Use”, n.d., p. 1). I plan for the jazz party to be from 7-11 p.m. with the jazz band playing from 7:30-9 p.m. Then dinner from 9-10:30 p.m. and Anonymous 2 the jazz band finale from 10:30-11 p.m. I believe I would need to rent the facility for at least 1 hour before and after the show to allow people to set up and cleanup. So my total cost would be $350x6 hours which equals $2,100. In addition, I would need to buy a couple of cash registers to process people’s payments at the door. I would have 3 cash registers to process people quickly. 3 registers at $59.99 each would cost me a total of $179.97 (Staples, n.d., p. 1). I would pay 3 people minimum wage, which is $8.40 an hour in Montgomery County according to the state of Maryland’s DLLR, to man the registers for 1.5 hours (“Minimum Wage”, 2015, p. 1). I don’t believe I would have much difficulty finding three people who would work for 1.5 hours at $8.40 an hour because of the location of my party. Bethesda Round House Theatre is located 1 block from the Bethesda-Chevy Chase High School, and I think three high school students would eagerly work 1.5 hours to earn some money. They could take that money to go to a movie in downtown Bethesda or go out to Chipotle for dinner afterwards. I would also hire 3 off duty Montgomery County Police Officers to watch the cash registers, but also to act as security if need be. Based on my personal knowledge, I know officers make time and a half for off-duty work so given that an officer makes $48,981 a year and then divide that by 52 weeks in a year and then divide that by 40 hours a week you get a hourly rate of $23.55 (Montgomery County Police, n.d., p. 1). At time and a half it would cost $35.33 an hour per officer. I would hire 3 officers for 5 hours each so my cost would be $529.95 ($35.33x5x3=$529.99). A band costs approximately $750-$1500 for a four hour time slot (Sam Hill Entertainment, n.d., p. 1) For the purposes of this paper, I will assume the average cost is $1,125 for the band by taking the average of those two prices ($750+$1500=$2,250/2=$1,125). I am also allocating $1,000 for various types of advertisements and decorations. Table 1: Fixed Costs Hourly Rate/Cost Quantity (how many people) Duration (hours) Total Cost Rent Facility $350.00 1 6 $2,100.00 Off-duty Police Officers $35.33 3 5 $529.95 Cashiers $8.40 3 1.5 $37.80 Cash Register $59.99 3 N/A $179.97 Band $1,125.00 1 4(contract min) $1,125.00 Advertising and Decorations $1,000.00 1 N/A $1,000.00 Total Fixed Costs: 4,972.72 Anonymous 3 My variable costs are those cost that vary depending on the number of people that attend (Boone, p. 415). I would use Gist Family Catering which charges $18.50-$20 per person so I will assume the average cost per person would be $19.25 ($18.50+$20=$38.50/2=$19.25) (“Lunch and Dinner Menu,” n.d., pp.1-3). So assuming I sell 400 tickets, $19.25x400 would be $7,700. This per person price includes a drink (punch), several main courses to choose from along with several sides, dessert and paperware (“Lunch and Dinner Menu,” n.d., pp.1-3). Each server is $110.00 for up to 5 hours (“Lunch and Dinner Menu,” n.d., pp.1-3). Based on internet research, you generally need 1 server per 20 people (A Tasteful Affair, n.d., p. 1). So if I have 400 people attending, I need 20 servers which would cost $2,200 (400/20=20) ($110x20=$2,200). I would also need tables and chairs. A 72” round table sits approximately 11 people and costs $14.20 to rent each table, and each chair costs $1.45 (A to Z Party Rental, n.d., p. 1). So assuming 400 guests, 400 chairs would cost me $580.00 and since a table costs $1.29 per person it would cost me $516.00 ($1.45x400=$580. $14.20/11=$1.29 per person for a table. $1.29x400=$516) Table 2: Variable Costs Per person Cost Quantity Total Cost Food and Drink $19.25 400 $7,700.00 Servers $110.00 20 $2,200.00 Chairs $1.45 400 $580.00 Round Tables $1.29 400 $516.00 Total Variable Costs 10,996.00 3. A breakeven analysis is used “to determine the minimum sales volume a product must generate at a certain price level to cover all costs” (Boone, p. 415). Break even= fixed costs/(avg sale price per unit- avg variable cost). My fixed costs are $4,972 please see table 1 and table 2 at above for a detailed break down. My avg sale price per unit is the price I am charging for a ticket $59.99. The avg variable cost is $27.49 based on dividing my total variable costs $10,996 by the number of people attending, 400. So $10,996/400= $27.49. Please see table 2 for a detailed break down. Therefore, I need to sell 154 tickets to breakeven. 4,972.72/ (59.99-27.49)= 153.006→ 154