10/15/2014 Craddock Cup

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1. The most important aspect of this case to consider is the relevant vs. fixed costs associated with the
Craddock Cup. With the costs shown from the tournament, we can see that there are three expenses that
are not relevant costs to the Craddock Cup. These costs are the Soccer Field rent from the city ($1,200),
Rivaldos Salary ($6,300), and the rent and utilities at ($2,700). These costs are not relevant to the Cups
expenses as the Craddock Youth Soccer League would incur these costs regardless of the Craddock Cup.
This means that a total of $10,200 is sunk costs to CYSL.
Cost Sunk? Fixed/Variable Expense
T-Shirts NO Variable $6 per shirt
Food and Beverages NO Variable $15 per player
Soccer Clinics NO Variable $6 per player per day
Registration Fee NO Fixed $1,500 per year
Insurance Premium NO Variable $4 per player
Soccer Field Rent YES Fixed $1,200
Soccer Balls NO Variable $54 per field
Referees NO Variable $100 per game
Trophies NO Variable $25 per trophy
Scout Hotel NO Variable $80 per night
Face Books NO Variable $6 per book
Marketing NO Fixed $2,200
Rivaldos Salary YES Fixed $6,300
Janstens Salary NO Fixed $12,000
Rent, Utilities YES Fixed $2,700
2. Part of this case analysis is gauging whether doubling the size of the tournament will increase
profitability for CYSL. The analysis with a side by side income sheet is shown below with only the
relevant costs to the Craddock Cup. Assumptions that were made to come to this income sheet is the
following:
With the additional teams, additional field space and goals are needed. As stated there are still 2 fields
which are not being utilized. In addition to these two fields, six fields will be rented from locals schools
with twelve goals being rented for 6 days to account for the preparation and clean up associated with the
tournament.
Fields = $150 x 6 fields = $900 per day x 6 days = $5,400
Goals = $60 x 6 fields = $360 per day x 6 days = $2,160
$5,400 + $2,160 = $7,560
We are also assuming that the cost of trophies is the same because there will still be two winning teams.
$25 x 36 players = $900
We are assuming that Rivaldo has incorporated his new advertising budget of $1000 as well as the new
costs of the additional 15 recruiters and the additional Face Books into his analysis of adding 32 new
teams.
15($160) = $2,400
20($6) = $120
With this analysis, it is easy to see that when accounting for the relevant costs associated with the
tournament that it should not be shut down. In fact, if it is possible, Rivaldo should double the size of the
10/15/2014 Craddock Cup
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tournament and add the appropriate changes in respect to advertising and attracting recruiters.
Impact of adding 32 teams:
Profit Statement Current Size Adding 32 Teams
Registration Fees $9,440 $18,880
T-Shirts 4,800 9,600
Concessions 17,280 34,560
Soccer Clinic 4,320 8,640
Contributions 14,000 14,000
Total Revenue $49,840 $85,680
T-Shirts 1,920 3,840
Concessions 8,640 17,280
Soccer Clinics 2,592 5,184
Player Insurance 2,304 4,608
Registration with state YSL 1,500 1,500
Extra fields and goals 7,560
Soccer Balls 432 864
Referees 6,400 12,800
Trophies 900 900
Hotels 4,000 6,400
Face Books 450 570
Marketing and advertising 2,200 3,200
CYSL salaries 12,000 12,000
Total Expenses $43,338 $76,706
Profit $6,502 $8,974
3. Break-Even Increase
($1,000 + $2,400 + $120)/64 = $55
This analysis means that in respect to the changes in advertisement and additional recruiters, CYSL
would have to increase their registration price by $55 to $350 in order to break even with an additional 32
teams.