BM1710

TASK PERFORMANCE

SOUTHWESTERN UNIVERSITY’S FOOD SERVICE

Southwestern University (SWU) has witnessed tremendous growth in its basketball. With that growth, fueled
by the hiring of legendary coach Zeus Santos, has come more fame, the need for a bigger arena, and more
complaints about seating, parking, long lines, and concession stand prices. SWU’s president, Dr. Justin
Chua, was not only concerned about the cost of expanding the existing stadium versus building a new
stadium, but also about the other support activities. He wants to be sure that these various support activities
generate revenue adequate to pay for themselves. Consequently, he wants the parking lots, game
programs, and food service to all be handled as profit centers. At a recent meeting discussing the new
stadium, Chua told the stadium manager, Lee Torres, to develop a break-even chart and related data for
each of the centers. He instructed Torres to have the food service area break-even report ready for the next
meeting. After the discussion with other facility managers and his subordinates, Torres developed the table
below that shows the expected percent of revenue by item, the suggested selling prices, and his estimate
of variable costs.

Item Selling Price/Unit Variable Cost/Unit Percent Revenue

Soft drinks 75 37.5 25%
Coffee 100 25 25%
Hot dogs 100 40 20%
Hamburgers 250 50 20%
Misc. Snacks 50 20 10%

Torres’ fixed costs are interesting. He estimated that the prorated portion of the stadium cost would be:
salaries for food services at ₱500,000 (₱100,000 for each of the five (5) home games); 2,400 square feet
of stadium space at ₱100 per square foot per game; and six (6) people in each of the six (6) booths for five
(5) hours at ₱350 an hour.

Torres wants to be sure that he has a number of things for Dr. Chua: (1) break-even point in peso for all
food sales; (2) realistic sales estimates (for instance, he wants to know how much each attendee is
spending on food at his projected break-even if attendance grows to 8,000); (3) what sales per attendee
would be if attendance remained about 4,000; and (4) what his unit sales would be at break-even, that is,
what are his sales of soft drinks, coffee, hot dogs, and hamburgers. He felt that this latter information would
be helpful to understand how realistic the assumptions of his model are. He also wanted to be prepared for
any questions that Dr. Chua and others might bring up at the next meeting.

Instruction: Prepare the report with the items noted so it is ready for Dr. Chua at the next meeting.

06 Task Performance 1 *Property of STI

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