The Warsaw Air Show A group of community enthusiasts think that an air show woul
ID: 2414993 • Letter: T
Question
The Warsaw Air Show
A group of community enthusiasts think that an air show would be a positive event for Warsaw, Indiana and greater Kosciusko County. The goal was an annual air show that would improve with each passing year and add value to the community. Financially, the objective was to break even in the first year and earn $10,000 in the second year. Once up and running, the goal was to earn an average of $25,000 per year. The annual surpluses would be available to reinvest in the air show and support other community activities.
The original group of enthusiasts added strategically to their number and formed an air show committee. The committee quickly determined that 1) appearance fees would be necessary to attract desirable aircraft, 2) parking and entry fees would be insufficient to cover the air show costs, and 3) thus, funds would have to be raised through sponsorships. Sponsorship levels were set at $100, $1,000, $2,000 and $5,000.
A local civic group agreed to provide concessions. Profits from the concessions will be split evenly between the air show and civic group.
The air show will take place on the third weekend in August, starting on Friday evening and ending on Sunday afternoon. Entry fees are $10 for adults and $5 for children 12-and-younger. Parking fees are $5 per vehicle.
During the first year of the air show attendance and parking were as follows:
Vehicles Parked
Adult Admissions
Children Admissions
Friday
800
1,000
225
Saturday
1,750
2,450
1,100
Sunday
625
775
180
Total
3,175
4,225
1,505
Below are revenue and expense figures for the first year of the air show:
Revenues
Sponsor contributions
$30,000
Parking fees
15,875
Entry fees
49,775
Concessions
4,200
Total revenues
$99,850
Expenses
Appearance fees
$35,000
Meals and lodging
7,200
Advertising
4,900
Insurance
8,250
Rent
9,300
Sanitation
5,100
Fuel
11,350
Printing
3,200
Parking and traffic control
7,800
Cleanup
4,350
Miscellaneous
2,950
Total expenses
99,400
Surplus
$450
5. Planning for next year assume the following: A) Fixed costs will be $50,000. B) Variable costs will be 75% of parking and entry fees. C) Sponsor contributions will grow to $45,000. D) All concession profits will go to the civic group providing concessions. What will be the breakeven amount (in total) of parking and entry fees?
Vehicles Parked
Adult Admissions
Children Admissions
Friday
800
1,000
225
Saturday
1,750
2,450
1,100
Sunday
625
775
180
Total
3,175
4,225
1,505
Explanation / Answer
At break-even, Total revenues = Total cost.
Total cost = Fixed cost + Variable cost = 50,000 + (15,875 + 49,775 ) x 75% = $ 99,237.50
Since sponsor contributions are expected to grow to $ 45,000, breakeven amount of parking and entry fees
= 99,237.50 - 45,000 = $ 54,237.50
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