Alltel Pavilion

811 Words Nov 18th, 2011 4 Pages
TO: Pam Berg, Manager of the ALLTEL Pavilion
FROM: Valentina Golman, Cost Accountant
DATE: October 29, 2011
SUBJECT: ALLTEL’s Strategy and CVP Analysis

As requested, CVP analysis of the ALLTEL Pavilion has been investigated. The focus of the investigation was on firm’s competitive strategy, operating results, negotiating contract fees with artists, earning budgeted profit goals.

Findings:

1. In response to the competitive strategy of the ALLTEL Pavilion * it is noted to be differentiation. The firm positions and distinguishes itself from its competitors by providing high end experience to its customers. The unique value of the product would be: advanced technology, no bad seat in the house, beautiful settings, wonderful
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The Pavilion is expected to make this profit. Refer to exhibit3 (2B)

3. If number of projected tickets sold is changing from 8,251 to 7,000, fee paid to the KFBS concert is also changing to $200,000 and the Pavilion wants to earn $30,000 after 40% taxes then as follows average ticket price should change from $22.12 to $32.95. Refer to calculations in exhibit 3 (3)

4. Negotiating the fee for the KFBS Allstars: fixed-pay or per capita contracts with average ticket price of $22.12

* The maximum fixed fee the Pavilion can pay to the KFBS Allstars is $59,630, in order to earn $45,000 after 40% tax and projected 6,000 tickets sold. Refer to exhibit 3 (4A).

* The maximum fixed fee The ALLTEL can pay to the KFBS Allstars is $455,030 if the show is expected to be sellout and the Pavilion wants to earn $45,000 after 40% tax. Refer to exhibit 3 (4B).

* The maximum per capita fee that the Pavilion can pay to the KFBS Allstars is $16.65 or $324,819, assuming the show is sellout and the Pavilion wants to earn $180,000 after 40% tax. Refer to exhibit 3 (4C).

5. CVP analyses helps to understand how profit is affected by the relations among revenue, cost and volume. The decisions on ticket pricing, volume being sold, incurring a cost impact on desired profit. So, CVP analyses helps to determine how many tickets and at what average price the
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