Week 5 Accounting Team Assignment

Week 5 Accounting Team Assignment


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Purpose of Assignment 

The case study focuses on break-even, margin of safety, and incremental analysis and allows students to experience working through a business scenario to apply these tools in managerial decision making.  Students are required to make decisions and provide solutions based on their evaluation of financial data.

Assignment Steps 

Resources:  Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Committee (SEC)

Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products.

Scenario: Shelley Jones has just been elected as president of the Circular Club of Auburn, Kansas, and she has been asked to suggest a new fundraising activity for the club. After a considerable amount of research, Shelley proposed the Circular Club sponsor a professional rodeo. In her presentation to the club, Shelley recommends the fundraiser become an annual activity with the following goals:

  • Continue to grow each year
  • Give back to the community
  • Provide the club a presence in the community

Shelley’s goal in the first year is to have an activity that would become an “annual community event” and would break even the first year and raise $5,000 the following year. In addition, based on the experience of other communities, Shelley believed a rodeo could grow in popularity so the club would eventually earn an average of $20,000 annually.

A rodeo committee was formed. Shelley contacted the world’s oldest and largest rodeo-sanctioning agency to apply to sponsor a professional rodeo. The sanctioning agency requires a rodeo to consist of the following five events: Bareback Riding, Bronco Riding, Steer Wrestling, Bull Riding, and Calf Roping, Team Roping and Women’s Barrels. Prize money in the amount of $3,000 would be paid to winners in each of the seven events. Members of the rodeo committee contracted with RJ Cattle Company, a livestock contractor on the rodeo circuit, to provide bucking stock, fencing, and chutes. Realizing costs associated with the rodeo were tremendous and ticket sales would probably not be sufficient to cover the costs, the rodeo committee sent letters to local businesses soliciting contributions in exchange for various sponsorships. Exhibiting Sponsorships are $1,000 to exhibit products or services, while Major Sponsorships are $600, and Chute Sponsorships are $500 to have the name of the sponsor’s business on one of the six bucking chutes. For a contribution of $100, individual sponsors will be included in a Friends of Rodeo list found in the rodeo programs.

A local youth group will be contacted to provide concessions to the public and divide the profits with the Circular Club. The Auburn Circular Club Pro Rodeo Roundup will be held on June 1, 2, and 3. The cost of an adult ticket is set at $8 in advance or $10 at the gate; the cost of a ticket for a child 12 or younger is set at $6 in advance or $8 at the gate. Tickets are not date-specific. Rather, one ticket will admit an individual to one performance of his or her choice– Friday, Saturday, or Sunday. The rodeo committee is able to secure a location through the county supervisors’ board at a nominal cost to the Circular Club. The arrangement allows for the use of the county fair grounds and arena for a one-week period. Several months prior to the rodeo, members of the rodeo committee were notified the bleachers at the arena would hold 2,500 patrons. On Saturday night, paid attendance was 1,663, but all seats were filled due to poor gate controls.  Attendance was 898 Friday and 769 on Sunday.

The following revenue and expense figures relate to the first year of the rodeo. 


Contributions from sponsors      $22,000

Receipts from ticket sales         $28,971

Share of concession profits         $1,513

Sale of programs                           $600

Total receipts                            $53,084


Livestock contractor                  $26,000

Prize money                              $21,000

Contestant hospitality                  $3,341*

Sponsor signs for arena               $1,900

Insurance                                    $1,800

Ticket printing                              $1,050

Sanctioning fees                             $925

Entertainment                                 $859

Judging fees                                   $750

Port-a-potties                                  $716

Rent                                               $600

Hay for horses                                 $538

Programs                                         $500

Western hats to first 500 children       $450

Hotel rooms for stock contractor        $325

Utilities                                            $300

Sand for arena                                  $251

Miscellaneous fixed costs                  $105

Total expenses                                            $61,410

Net loss                                                      $ (8,326) 

*The club contracted with a local caterer to provide a tent and food for the contestants. The cost of the food was contingent on the number of contestants each evening. Information concerning the number of contestants and the costs incurred are as follows:

Contestants                  Total Cost

Friday                                  68                            $998

Saturday                              96                          $1,243

Sunday                                83                          $1,100


On Wednesday after the rodeo, members of the rodeo committee met to discuss and critique the rodeo. Jonathan Edmunds, CPA and President of the Circular Club, commented that the club did not lose money. Rather, Jonathan said, “The club made an investment in the rodeo.”  The rodeo committee has requested an analysis of the rodeos performance and evaluation of the CPA’s review.

Create a minimum 10-slide presentation, including detailed speaker notes, as the committee’s consultation team and respond to the following:

  • What did Jonathan Edmunds mean when he said the club had made an investment in the rodeo? Is his comment consistent with Shelley’s idea that the club should have a fundraiser that would:




  • Shelley, Jonathan, and Adrian Stein, the Fundraising Chairperson, are beginning to make plans for next year’s rodeo. Shelley believes by negotiating with local feed stores, inn- keepers, and other business owners, costs can be cut dramatically. Jonathan agrees. After carefully analyzing costs, Jonathan has estimated the fixed expenses can be pared to approximately $51,000. In addition, Jonathan estimates variable costs are 4% of total gross receipts. After talking with business owners who attended the rodeo, Adrian is confident the funds solicited from sponsors will increase. Adrian is comfortable in budgeting revenue from sponsors at $25,600. The local youth group is unwilling to provide concessions to the audience unless they receive all of the profits. Not having the personnel to staff the concession booth, members of the Circular Club reluctantly agree to let the youth group have 100% of the profits from the concessions. In addition, members of the rodeo committee, recognizing the net income from programs was only $100, decide not to sell rodeo programs next year.

◦     Compute the break-even point in dollars of ticket sales assuming Adrian and Jonathan are correct in their assumptions.

  • Shelley has just learned you are calculating the break-even point in dollars of ticket sales. She is still convinced the Club can make a profit using the assumptions above (second bullet point above).

◦     Calculate the dollars of ticket sales needed to earn a target profit of $6,000.

◦     Calculate the dollars of ticket sales needed to earn a target profit of $12,000.

  • Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues calculated above (third bullet point above) to earn a $6,000 profit? Show calculations to support your answers.
  • A few members in the Circular Club do not want to continue with the annual rodeo. However, Shelley is insistent the Club must continue to conduct the rodeo as an annual fundraiser. Shelley argues she has spent hundreds of dollars on western boots, hats, and other items of clothing to wear to the rodeo. Are the expenses related to Shelley’s purchases of rodeo clothing relevant costs? Why or why not?
  • Rather than hire the local catering company to cater the Contestant Hospitality Tent, members of the Circular Club are considering asking Shady’s Bar-B-Q to cater the event in exchange for a $600 Major Sponsor spot. In addition, The Fun Shop, a local party supply business, will be asked to donate a tent to use for the event. The Fun Shop will also be given a $600 Major Sponsor spot. Several members of the Club are opposed to this consideration, arguing that the two Major Sponsor spots will take away from the money to be earned through other sponsors. Adrian Stein has explained to the members the Major Sponsor signs for the arena cost only $48 each. In addition, there is more than enough room to display two additional sponsor signs. What would you encourage the Club to do concerning the Contestant Hospitality Tent? Would your answer be different if the arena were limited in the number of additional signs that could be displayed? What kind of cost would you consider in this situation that would not be found on a financial statement?
  • Assume you are elected chair of the rodeo committee for next year. What steps would you suggest the committee take to make the rodeo profitable?

Additional Instructor Information for Case Assignment–Important Please Read.


General:  This assignment requires a minimum 10 slide presentation with speaker notes.  To facilitate the assignment of work, speaker notes should be prepared in Word versus by slide in PowerPoint.


Create a Word document and answer the seven content requirements in the assignment and rubric (listed below) in that document.  These responses are the speaker notes.  Show support for all calculations and answers.


Create the Power Point slide show in addition to the Speaker notes Word document.  The team will submit two files for review. 


Below is additional information to help you with this case.  You must read the case thoroughly along with the details below.  






Requirement 2:   Compute the break-even point in dollars of ticket sales assuming Adrian and Jonathan’s assumptions are correct as given in the case. 

This requirement is to calculate break even in dollars.  The amount you calculate will be from all sources of revenue including contributions from sponsors.   The requirement is for ticket sales only.  Contributions from sponsors is stated in the case as $25,600.   As an example, let’s say that using the break even formula you calculate break even in dollars as $60,000.  This is not the answer for the requirement.  You need the amount of ticket sales which would be the $60,000 less $25,600 or $34,400 in ticket sales.  It is critical that you account for the contributions from the sponsors.  The rest of the case deals with ticket sales revenue.  If you don’t calculate ticket sales correctly, all of the other case answers you get will be wrong.


Note:  The case states that variable costs are 4% of total revenue.  What must the contribution margin ratio be if variable costs are 4% of total revenue?


Requirement 3:  Using the assumptions stated for requirement 2, calculate the dollar of ticket sales needed to earn a profit of $6,000 and $12,000.  Requires two calculations based on these two target profit amounts.

There are two calculations required.  The text shows how to go from break even to including a profit goal.  The requirement is for ticket sales so you must account for the contributions from the sponsors.


Requirement 4:  Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues needed to earn the $6,000 profit calculated in requirement 3 above?  Show calculations to support your answer.

The case states that attendance the first day of the past rodeo was 1,663 people.  The total attendance for the three days (add up the three amounts) was 3,330 people.  The case also states the prior ticket sales as $28,971.  Calculate the past rodeo’s average ticket cost.


Using the average ticket cost and the required ticket sales from requirement 3 at the $6,000 profit level, determine if the area seating is enough to support the number of tickets/attendance over the three days of the rodeo.


Requirement 5:  Some members of the Club do not want to continue the rodeo.  Shelley states dollars spent on various items.  Are Shelley’s clothing expenses relevant costs?  Why or why not? 

No calculations are required.


Requirement 6:  Would you recommend the Club ask Shady’ BBQ to cater the event and Fun Shop to provide the tent in exchange for the two major sponsor sign spots at the event?  Would your answer be different if sign display spots in the area were limited?  What kinds of costs not in a financial statement would you consider? 

Note the rodeo incurred $3,341 of contestant hospitality costs in the case information.  The key here is to identify the relevant costs and compare them to the prior expense.


Requirement 7:  If you are elected rodeo committee Chair next year, what steps would you suggest the committee take to make the rodeo more profitable? 

Identify three possible actions to make the rodeo more profitable and briefly describe them.


Please ask any questions in the general questions activity for this week.


Show your work in Microsoft® Word or Excel®. 

Complete calculations/computations using Microsoft® Word or Excel®. 

Format the assignment consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment. 

Note: Grades are awarded based upon individual contributions to the Learning Team assignment. Each Learning Team member receives a grade based upon his/her contributions to the team assignment. Not all students may receive the same grade for the team assignment.

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My portion is

At least 3 slides plus speaker notes and references

team and respond to the following:

  • What did Jonathan Edmunds mean when he said the club had made an investment in the rodeo? Is his comment consistent with Shelley’s idea that the club should have a fundraiser that would:

◦     Continue to get better each year.

◦     Give back to the community.

◦     Provide the club a presence in the community? Why or why not





My Part 2 Word document




Requirement 1:  What did Jonathan mean by saying the club had made an investment in the rodeo?   Is his comment consistent with Shelly’s goals for the rodeo? 

What is the goal of any business venture in financial terms?  Does a non-profit entity have similar goals