Craddock Cup

614 Words Apr 3rd, 2015 3 Pages
The purpose of this case is to illustrate the importance of understanding cost behavior in calculating the profit/contribution of the Craddock Cup. Within this context, the case asks whether the tournament should be continued, expanded or dropped. In addition, the case provides a vehicle to discuss allocation procedures and the concept of sunk costs. Finally, the case furnishes an opportunity to develop cost-volume-profit analysis within the context of relevant costs and revenues.
Questions:
1. In determining whether to keep or drop the Craddock Cup, review in detail the overhead expense allocations currently used by the CYSL. Should the overhead allocations be revised, eliminated or retained? What are the financial results to the
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*Please see Figure 1.2 for profit tables and relevant figures.
After adding an additional 32 teams to the tournament schedule, the relevant revenues including t-shirts, concessions, and soccer clinics doubled while the corporate contribution revenue remained the same. This brought anticipated revenue for the field of 64 teams to $85,680. The relevant expenses that don’t change include the tournament registration with the YSL, recruiters’ hotels, the face books, marketing and advertising costs, as well as the salary of Renee Jantsen; these costs are either fixed (salary, tournament registration fee, no additional marketing required) or unaffected by the introduction of the 32 new middle school teams (no additional recruiters because they’re uninterested in the middle school players, face books aren’t made for the middle school players). The relevant expenses that do change include the cost of the t-shirts, concession, the soccer clinic, the player insurance, referees, and trophies; all of these are variable costs, and thus double when the amount of competing teams doubles. There is also a new cost for the rental of the 6 additional fields from the local school necessary to host 64 teams (($150/field + $60 goalposts/field) * 6 fields * 2 days= $2,520). All of those costs add up to $69,046 for our total expenses category. Using our new revenue and expenses, the profit on the field of 64 teams is

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