17The Tech Student Government ASEociation (SGA) has several campus projectsit undertakes each year and its primary source of funding to support these projectsis a T-shirt sale in the fall for what is known as the "arange effect" football game(with orange being one of Tech's colors). The club's publicized (media) objective isfor everyone in the stadium to wear orange. The club's financial goal is to make aprofit of $150,000, but in order to have a significant number of fans buy the shirtsand wear them to the game, it doesn't want to price the T-shirts much more than$6. The stadium seats 62,000 fans, and the SGA would like to sell approximately45,000 orange T-shirts to achieve the desired orange effect, which it's relativelyconfident it can do. It will costS100,000to purchase, silk-screen print, and ship thismany T-shirts. The SGA sells the shirts through three sources: online, the two Techbookstores, and a local independent bookstore. While the bookstores don't expectto share in the profits from the sale of the shirts, they do expect for their directcosts to be sovered, including labor. space, and other costs. The two Techbookstores charge the SGA $0.85 per shirt. and the localindependent store charges$0.50 per shirt. The cost per sale online (including handling, packaging. andshipping) is S2.30 per shirt. The SGA estimates that it will sell 50% of the shirts atthe two Tech bookstores. 35% at the local bool.store. and 15% online. If the SGAsells the T-shirts for $6 ard if it cells all the chirts it order6. will it male enoughprofit to achieve its financial goal? If not. at what price would the SGA need to sellthe T-shirts. or how many would the SGA have to sell to achieve its financial goal?

The question is based on the concept of Business Transaction Analysis.

17.The Tech 5tudent Gavernment Association (SGA) has several campus projects it undertakes each year and its primary source of funding to Bupport these projects is a T-shirt sale in the fall far what is known as the "arange effect" football game (with orange being one of Tech's colors). The club's publicized (media) objective is for everyone in the stadium to wear orange. The club's financial goal is to make a profit of $150,000, but in order to have a significant number of fans buy the shirts nd uozr thom to

17.The Tech 5tudent Gavernment Association (SGA) has several campus projects it undertakes each year and its primary source of funding to Bupport these projects is a T-shirt sale in the fall far what is known as the "arange effect" football game (with orange being one of Tech's colors). The club's publicized (media) objective is for everyone in the stadium to wear orange. The club's financial goal is to make a profit of $150,000, but in order to have a significant number of fans buy the shirts nd uozr thom to

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 40P

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Southwestern Freight Forwarders is planning to hold a fundraising event to build an elementary school according to the company’s corporate social responsibility targets, at one of the local country clubs. It has two options for the event: OPTION 1: Crestview Country Cluba. Fixed rental cost of $1,000b. $12 per person for food OPTION 2: Tallgrass Country Cluba. Fixed rental cost of $3,000b. A caterer who charges $8.00 per person for food Southwestern Freight Forwarders has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local freight businesssupporters will donate any other items required for the event. a) Which option provides the least amount of risk? b) Which option provides the greatest operating income if 600 people attend? c) Which option provides the greatest degree of operating leverage if 600 people attend? d) Which option would you choose? Why?
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