UNIVERSITY OF BOHOL

PROFESSIONAL STUDIES

Case Study: Food and Beverages at Southwestern University Football Games

September 27, 2022

Assignment submitted to:

Dr. AMMON DENIS R. TIROL, DM, CPA
as partial fulfillment of the requirements in
BA 201 QUANTITATIVE ANALYSIS AND STATISTICS
First Semester AY 2022-2023

KEZIAH REVE B. RODRIGUEZ

MASTER OF SCIENCE IN BUSINESS ADMINISTRATION
 Case Study: Food and Beverages at Southwestern University Football Games

Case:

Southwestern University (SWU), a large state college in Stephenville, Texas, 30 miles

southwest of the Dallas/Fort Worth metroplex, enrolls close to 20,000 students. The school is the
dominant force in the small city, with more students during fall and spring than permanent
residents.

A longtime football powerhouse, SWU is a member of the Big Eleven conference and is
usually in the top 20 in college football rankings. To bolster its chances of reaching the elusive
and long-desired number-one ranking, in 2013 SWU hired the legendary Billy Bob Dillon as its
head coach. Although the number-one ranking remained out of reach, attendance at the six
Saturday home games each year increased. Prior to Dillon’s arrival, attendance generally
averaged 25,000–29,000. Season ticket sales bumped up by 10,000 just with the announcement
of the new coach’s arrival. Stephenville and SWU were ready to move to the big time!

With the growth in attendance came more fame, the need for a bigger stadium, and more
complaints about seating, parking, long lines, and concession stand prices. Southwestern
University’s president, Dr. Marty Starr, was concerned not only about the cost of expanding the
existing stadium versus building a new stadium but also about the ancillary activities. He wanted
to be sure that these various support activities generated revenue adequate to pay for
themselves. Consequently, he wanted the parking lots, game programs, and food service to all
be handled as profit centers. At a recent meeting discussing the new stadium, Starr told the
stadium manager, Hank Maddux, to develop a break-even chart and related data for each of the
centers.

He instructed Maddux to have the food service area break-even report ready for the next
meeting. After discussion with other facility managers and his subordinates, Maddux developed
the following table showing the suggested selling prices, his estimate of variable costs, and his
estimate of the percentage of the total revenues that would be expected for each of the items
based on historical sales data.

Maddux’s fixed costs are interesting. He estimated that the prorated portion of the stadium
cost would be as follows: salaries for food services at $300,000 ($60,000 for each of the six home
games); 2,400 square feet of stadium space at $5 per square foot per game; and six people per
booth in each of the six booths for 5 hours at $12 an hour. These fixed costs will be proportionately
allocated to each of the products based on the percentages provided in the table. For example,
the revenue from soft drinks would be expected to cover 25% of the total fixed costs.

Item Selling Price/Unit Variable Cost/Unit %Revenue

Soft drink $5.00 $1.50 25

Coffee 4.00 1.00 25

Hot dogs 6.00 2.00 20

Hamburgers 7.50 3.00 20

Misc. snacks 2.00 1.00 10

Maddux wants to be sure that he has a number of things for President Starr: (1) the total
fixed cost that must be covered at each of the games; (2) the portion of the fixed cost allocated to
each of the items; (3) what his unit sales would be at breakeven for each item—that is, what sales
of soft drinks, coffee, hot dogs, hamburgers, and snacks are necessary to cover the portion of the
fixed cost allocated to each of these items; (4) what the dollar sales for each of these would be at
these break-even points; and (5) realistic sales estimates per attendee for attendance of 60,000
and 35,000. (In other words, he wants to know how many dollars each attendee is spending on
food at his projected break-even sales at present and if attendance grows to 60,000.) He felt this
last piece of information would be helpful to understand how realistic the assumptions of his model
are, and this information could be compared with similar figures from previous seasons.

Discussion Pointer/Question:
Prepare a brief report for Dr. Starr that covers the items noted.

Specific Requirements:
1. Total Fixed Cost that must be covered at each of the game
2. Portion of the Total Fixed Cost allocated to each of the items
3. Unit of Sales that would be at break-even for each item and the sales for each item
necessary to cover the portion of the fixed cost allocated for each item
4. Dollar Sales for each of the items at break-even
5. Realistic Sales Estimates per attendee for attendance of 60, 000 and 35, 000.
 Report for Dr. Starr

Solution:

1. Total Fixed Cost that must be covered at each game

Food Service $ 60,000 ($ 300,000 /5 games)
Booth Staff Salary $ 360 (6 employees x 5 hrs. x $12 per hour)
Stadium Space $12,000 (2,400 sq ft. * 5 booths)
Fixed Allocation (per game) $ 72,360

2. Allocated cost for each food item in each game:

Assuming that proportion is based on the Total Revenue Percentage

Items Total Fixed Cost Corresponding Sub Total Number Amount

per Game Percentages of games
Soft drink $ 72,360 25% $ 18,090 6 $ 108,540
Coffee $ 72,360 25% $ 18,090 6 $ 108,540
Hotdogs $ 72,360 20% $ 14,472 6 $ 86,832
Burger $ 72,360 20% $ 14,472 6 $ 86,832
Snacks $ 72,360 10% $ 7,236 6 $ 43,416
Total $ 361, 800 100% $ 72, 360 $ 434, 160

3. Units of each Item to Cover the Break-Even Point

Contribution of each item:
Item Contribution Margin
per Unit
Soft Drink 3.5
Coffee 3.0
Hot Dogs 4.0
Burger 4.5
Misc. snacks 1.0

Weighted average Break Even Point (units) = Total Fixed Cost / Contribution Margin per Unit
= (434,160) / (3.5*25%+3.0*25%+4.0*20%+4.5*20%+1.0*10%)
Weighted average Break Even Point (units) = 126,762.04 or 126, 762 units
Unit per Item:
Total Unit of Sales
Item Unit of Sales Percentage
per Item
Soft Drink 126,762.04 25% 31,690.51
Coffee 126,762.04 25% 31,690.51
Hot Dogs 126,762.04 20% 25,352.41
Burger 126,762.04 20% 25,352.41
Misc. snacks 126,762.04 10% 12,676.20

4. Dollar Sales of each Item required to cover the Break-even:

Item Per Unit Percentage Total Units Amount in $ Amount /item in $

Soft Drink 126,762.04 25% 31,690.51 $5 $158,452.56

Coffee 126,762.04 25% 31,690.51 $4 $126,762.04

Hot Dogs 126,762.04 20% 25,352.41 $6 $152,114.45

Burger 126,762.04 20% 25,352.41 $7.5 $190,143.07

Misc. snacks 126,762.04 10% 12,676.20 $2 $25,352.40

Total Break-Even Sales $652, 824.52

5. Projected Sales for 35,000 attendees

Number of Percentage
Item Amount in $ Total in $
Attendees Rate
Soft drink 35,000 25% $5 $43,750
Coffee 35,000 25% $4 $35,000
Hot Dogs 35,000 20% $6 $42,000
Burger 35,000 20% $7.5 $52,500
Snacks 35,000 12% $2 $8,400
Total Sales $181,650
Projected Sales for 60,000 attendees
Number of Percentage
Item Amount in $ Total in $
Attendees Rate
Soft drink 60,000 25% $5 $75,000
Coffee 60,000 25% $4 $60,000
Hot Dogs 60,000 20% $6 $72,000
Burger 60,000 20% $7.5 $90,000
Snacks 60,000 12% $2 $14,400
Total Sales $ 311,400

Conclusion
With the figures and calculations above based on the specific requirements needed by Dr.
Starr, Southwestern University will not reach its Break-even Sales even if the attendance will
reach into 60, 000.