Cost and Southwestern University Essay

Southwestern University (SWU), located 30 miles southwest of the Dallas/Fort charge metroplex, has witnessed tremendous growth in its football program (see Southwestern University A, in Chapter 4). With that growth, fueled by the hiring of known coach Bo Pitterno, has come more fame, the need for a bigger scene of action, and more complaints about seating, lay, long lines, and subsidisation stand prices (see Southwestern University C, in Chapter 6). Southwestern Universitys president, Dr. Joel Wisner, was not only concerned about the greet of expanding the existing bowlful versus building a new stadium, but also about the ancillary activities.He wants to be sure that these various support activities generate revenue adequate to pay for themselves. Consequently, he wants the parking lots, game programs, and food service to all be handled as profit centers. At a recent meeting discussing the new stadium, Wisner told the stadium manager, Hank Maddux, to develop a break-even char t and related data for from each one of the centers. He instructed Maddux to have the food service bea break-even report ready for the next meeting. After discussion with some other facility managers and his subordinates, Maddux developed the table below. This table shows the expected percent of revenue by item, the suggested selling prices, and his forecast of variable costs.Item SellingPrice/Unit VariableCost/Unit SalesUnits Soft tope $1.50 $ .75 10000Coffee 2.00 .50 5000 Hot dogs 2.00 .80 2000Hamburgers 2.50 1.00 5000Misc. snacks 1.00 .40 3000Madduxs fixed costs are interesting. He estimated that the prorated portion of the stadium cost would be salaries for food services at $100,000 ($20,000 for each of the five home games) 2,400 square feet of stadium space at $2 per square foot per game and six people in each of the six booths for 5 hours at $7 an hour.Maddux wants to be sure that he has a number of things for chairman Wisner (1) break-even point in dol lars for all food sales (2) realistic sales estimates (for instance, he wants to know how many an(prenominal) dollars each attendee is spending on each food item at his projected break-even if attending grows to 70,000) (3) what sales per attendee would be if attendance remained about 27,000 and (4) what his unit sales would be at break-even, that is, what are his sales of soft drinks, coffee, hot dogs, and hamburgers. He felt this latter information would be helpful to go out how realistic the assumptions of his model are.