Case 10

Friend Break-Even Analysis

Friend adalah organisasi amal yang mensponsori kegiatan kelompok dan menyediakan
pendampingan kepada anak anak remaja yang memiliki masalah pada orang tua tunggal.
Organisasi ini menyediakan kayanan yang profesional, dengan tujuan memberikan pendampingan
dalam bentuk kedekatan yang bermakna seperti halnya orang tua dengan anak anaknya sendiri.
Organisasi ini aada sejak tahun1911 di Cincinhati, Ohio. Dan kantor pusatnya berada di New York.
Organisasi ini memiliki cabang baru Culver City di Forsyth County, Virginia, yang baru dimulai
enam bulan lalu namun memilki anggaran operasional sebesar $60.000. Anggarannya sederhana
menurut sebagian besar standar tetapi akan sulit dicapai mengingat kebaruan organisasi dan resesi
nasional yang telah melanda Culver City dengan sangat keras. Sekitar 30 persen dari dana yang
diperlukan akan berasal dari United Appeal, dan sisanya dari hibah pemerintah, beberapa acara
penggalangan dana, dan donasi.

• THE IMPORTANCE OF THE DANCE

Organisasi ini ingin mengadakan acara tari sebagai acara penggalangan dana untuk perusahaan
itu sendiri. Mereka berencana untuk memperoleh $8000 sebagai defisit tahuan perusahaan.
Dengan berbagai penjelasan dan pertimbangan dari beberapa pihak yan terkait maka Organisasi
Friends memutuskan akan menggelar acara tersebut. Setelah pembahasan dilakukan, maka
organisasi memutuskan untuk menjual tiket dan harga penjualan barang sebagai sumber
pemasukan. Yang pertama ada tiket pesta dansa yang dijual seharga $50 per pasangan, dan
penjualan minuman dengan harga $10 per pasangan. Pesta akan diadakan di Mountain Lodge,
yang memiliki ballroom tempat duduk 300 pasangan.
Bob Lyttle telah mengatur agar pemilik menyumbangkan ballroom. Hors d'oeuvres akan
diberikan kepada Friends dengan biaya $5,00 per pasangan, dan $500 akan menutupi biaya tenaga
kerja dan lain-lain. Satu-satunya biaya lain adalah biaya band, yang pemilihannya menimbulkan
kontroversi di antara penyelenggara tari. Pilihannya adalah antara The Flame dan The Charms.
Dengan harga yang berbeda yaitu untuk The Flame sebesar $6000 dan untukvThe Charms $3000

• SOME ARGUMENTS FOR EACH BAND

Penggemar The Flames beranggapan bahwa band ini akan meningkatkan jumlah penjualan tiket
karena popularitas dan kualitas mereka. Namun masalahnya adalah jika memilih The Flames
sebabagi grup yang akan tampil maka biaya yang dikeluarkan juka kan besar, mengingat diluar
sana sedang terjadi resesi. Perusahaan sangat mempertimbangkan hal ini karena mereka tidak
ingin mendapatkan kerugian. Hal tersebut memberikan pandangan bahwa The Flame tidak akan
memberikan dampak positif untuk jangka panjang kepada organisasi. Lalu Bill Frady mengatakan
bahwa The Charms adalah pilihan yang masuk akan untuk saat ini, walaupun band ini tidak
memiliki popularitas sebesar The Flame, namun ada pertimbangan jika harganya harus diturunkan
menjadi $40 per pasangan. "Mungkin," dia berspekulasi, "kita bisa mendapatkan lebih dari
sekadar keuntungan volume yang akan hilang dari harga satuan. Setelah banyak diskusi, semua
setuju, sangat mungkin bahwa 200 tiket dapat dijual meskipun Mantra digunakan dan 150 adalah
batas bawah mutlak. Diperkirakan juga bahwa menurunkan harga menjadi $40 akan
meningkatkan penjualan sebanyak 20 hingga 40 tiket.

Case 10
Friend Break-Even Analysis
Friend is a charitable organization that sponsors group activities and provides mentoring to
teenage children who have problems with single parents. The organization provides professional
care, with the aim of providing mentoring in the form of meaningful closeness as does a parent
with his or her own child.
The organization has existed since 1911 in Cincinhati, Ohio. And its headquarters are in New
York. The organization has a new branch of Culver City in Forsyth County, Virginia, which only
started six months ago but has an operating budget of $60,000. The budget is modest by most
standards but will be difficult to achieve given the organizational novelty and the national
recession that has hit Culver City so hard. About 30 percent of the required funds will come from
the United Appeal, and the rest from government grants, some fundraising events and donations.

• THE IMPORTANCE OF THE DANCE

The organization wants to hold a dance event as a fundraising event for the company itself. They
plan to earn $8000 as a company deficit. With various explanations and considerations from
several related parties, the Friends Organization decided to hold the event. After the discussion
was carried out, the organization decided to sell tickets and the price of selling goods as a source
of income. The first there are dance party tickets that sell for $50 per couple, and drink sales for
$10 per couple. The party will be held at Mountain Lodge, which has a 300-pair seating ballroom.
Bob Lyttle has arranged for the owner to donate the ballroom. Hors d'oeuvres will be given to
Friends at a cost of $5.00 per couple, and $500 will cover labor costs and others. The only other
cost was the band's fee, whose selection caused controversy among dance organizers. The choice
is between The Flame and The Charms. At different prices i.e. for The Flame for $6000 and
forvThe Charms $3000

• SOME ARGUMENTS FOR EACH BAND

Fans of The Flames assumed that the band would increase the number of ticket sales due to their
popularity and quality. But the problem is that if you choose The Flames as a group that will
perform, the costs incurred will be great, considering that there is a recession out there. Companies
take this into consideration because they don't want to get a loss. This gives the view that The
Flame will not have a positive impact in the long term on the organization. Then Bill Frady said
that The Charms is the go-to option for now, although the band doesn't have as much popularity
as The Flame, but there are considerations if the price should be lowered to $40 per pair.
"Perhaps," he speculated, "we can get more than just volume gains that will disappear from the
unit price. After much discussion, all agreed, it is very likely that 200 tickets can be sold even if
the Spell is used and 150 is the absolute lower limit. It is also estimated that lowering the price to
$40 will increase sales by as much as 20 to 40 tickets.

From the cases above, we get information that can be summarized like the table below:

Band The Charms The Flames

Band Cost $3,000 $6,000
Labor/Miscellaneous $500 $500
Hors d’oeuvers per Couple $5 $5
Ticket per Couple $50 $50
Drinks per Couple $10 $10

QUESTIONS
For questions 1 to 4 assume the price of a ticket is $50.
1. (a) Calculate the break-even ticket sales for each band.
𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡
Answer: Break-Even Point (BEP) = 𝐶𝑜𝑛𝑡𝑟.𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑈𝑛𝑖𝑡 𝑃𝑟𝑖𝑐𝑒−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡

Break-Even Point (BEP) for Charms

𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡
BEP for Charms = 𝑈𝑛𝑖𝑡 𝑃𝑟𝑖𝑐𝑒−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡
500+3,000
BEP = = 64 tickets.
60−5

Break-Even Point (BEP) for Flames

𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡
BEP for Flames = 𝑈𝑛𝑖𝑡 𝑃𝑟𝑖𝑐𝑒−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡
500+6,000
BEP = 60−5
= 119 tickets.
(b) Express your answer as a percentage of the estimated ticket sales.
64
BEP for Charms (%) = 200 × 100% = 32%
119
BEP for Charms (%) = 200 × 100% = 59,5%

2. (a) Assume the Charms are selected. Develop a table showing the profits on the dance at the
following ticket levels: 150, 200, 250, and 300 (sellout).
Answer:

Tickets Total Revenue Total Variable Cost Total Fixed Cost Profit
150 9,000 750 3,500 4,750
200 12,000 1,000 3,500 7,500
250 15,000 1250 3,500 10,250
300 18,000 1500 3,500 13,000

b) Repeat part (a) assuming the Flames are selected.

Answer:

Tickets Total Revenue Total Variable Cost Total Fixed Cost Profit
150 9,000 750 6,500 1,750
200 12,000 1,000 6,500 4,500
250 15,000 1,250 6,500 7,250
300 18,000 1,500 6,500 10,000

3. How many extra tickets must be sold to compensate for the higher cost of the Flames?
Answer: We can find difference from break-even ticket sales from both (The Flames and The
Charms) = 119 tickets – 64 tickets = 55 tickets. So, extra tickets must be sold to compensate for
the higher cost of the Flames is 55 tickets.

4. If the dance is to raise $8,000, how many tickets must be sold if the Flames are used? The
Charms?
Answer:
Unit Sales = (Costs + Target Profit) / C.M per unit

• Flames = (6500 + 8000) / 55 = 264 tickets

• Charms = (3500 + 8000) / 55 = 209 tickets

5. Evaluate the proposal to lower the price of a ticket to $40. What implications, if any, does it
have for the band choice?
Answer:
Finding the profit levels at maximum and minimum limits
Profit = [Unit Sales (Q) x C.M] - F.C

• Lower limit 150 tiket

Price 50 40 40

Quantity 150 170 190

Flames $1750 $1150 $2050

Charms $4750 $4150 $5050

• Upper limit 200 ticket

Price 50 40 40

Quantity 200 220 240

Flames $4500 $3400 $4300

Charms $7500 $6400 $7300

Notes :
Batas Atas dan Bawah (penjualan tiket) meningkat sebesar 20 untuk mendapatkan tingkat
keuntungan yang berbeda dan mendapatkan skenario terbaik dan terburuk.
6. Based on your previous answers and other information provided in the case, which band would
you pick? Why?

Answer:
Charms band is the best pick for this situation because it looks more profitable than Flames
based on the results given on the table above even the ticket price was reduced to $40.

7. The break-even and profit formulas you used are based on certain assumptions. What are they?
Are they likely to hold for this situation? Explain.
Answer:
Break Even Points for Charms = 32%, Break Even Points for Flames = 59.5%
Profit for Charms (best case) = $7,300, Profit for Flames (best case) = $4,300
In this case, Charms gives the best result given the lower Break-Even Points and larger profit than
Flames

8. Suppose the dance organizers were sure that 270 tickets could be sold at a price of $50 regardless
of the band used. How would this affect the choice?
Answer:

Profit for Flames 270 x 60 – (1350 + 6500)

Profit = $8.350
Profit for Charms 279 x 60 – (1350 + 3500)
Profit = $11.350

9. How would knowledge of the demand curve for each band be helpful for determining which
group to use and what price to charge?
Answer:
The knowledge in demand curve and comparison each band will help us determine which is more
profitable than the other. If the demand curves are the same, profits are same as well. In this case,
choosing among the two options would be hard