Financial Plan
Budgeted income statement
The budgeted income statement for the event is given as under.
Table SEQ Table * ARABIC 1: Budgeted income statement
Budgeted income statement
Price 100 Customers 150 Customers
Sales 80 125
Ticket 1 20 1600 2500
Ticket 2 25 2000 3125
Ticket 3 30 2400 3750
CDs 50 4000 6250
T-Shirts 80 6400 10000
Posters 45 3600 5625
Total sales 250 20000 31250
Less: variables costs
CDs 30 2400 3750
T-Shirts 50 4000 6250
Posters 10 800 1250
Total variable costs 90 7200 11250
Contribution margin 160 12800 20000
Less: fixed costs
S, G, & A costs 2500 2500 2500
Total fixed costs 2500 2500
Add: Donations 100000 100000 100000
Net income $110,300 $117,500
Here, the assumption is that Sales, General, and Administrative costs will be $2,500. This will be due to the various marketing and advertising expenses born by the organizers, as well as petty cash available for miscellaneous administrative expenses.
Cost-Volume-Profit analysis
The cost-volume-profit analysis is supposed to develop the break-even sales volume and dollars for the business. In addition, the target profit method gives the volume of sales required to achieve the target profit. Finally, the margin of safety indicates as to what is the ratio of additional sales required to achieve the target. These are given in Table 2.
Table SEQ Table * ARABIC 2: Cost-volume-profit analysis
Cost-Volume-Profit analysis
Contribution margin 160
Fixed costs 2500
Break-even volume 15.625
Total sales 250
CM ratio 0.64
Break-even sales 390.625
Desired profit 10000
Desired profit volume 78.125
Margin of safety 0.8
It is also pertinent to develop a graph of the break-even point. The break-even graph is given in Figure 1.
Figure SEQ Figure * ARABIC 1: Break-even graph
The break-even graph indicates that about 15 units need to be sold in order to get a break-even.
Cost-benefit analysis
The cost-benefit analysis is done for an alternative scenario where the event will be organized in-house in an auditorium, instead of in the park. The alternative budgeted income statement is given in Table 3.
Table SEQ Table * ARABIC 3: Alternative in-door event
Budgeted income statement 2
Price 100 Customers 150 Customers
Sales 80 125
Ticket 1 20 1600 2500
Ticket 2 25 2000 3125
Ticket 3 30 2400 3750
CDs 50 4000 6250
T-Shirts 80 6400 10000
Posters 45 3600 5625
Total sales 250 20000 31250
Less: variables costs
CDs 30 2400 3750
T-Shirts 50 4000 6250
Posters 10 800 1250
Total variable costs 90 7200 11250
Contribution margin 160 12800 20000
Less: fixed costs
S, G, & A costs 5000 5000 5000
Total fixed costs 5000 5000
Add: Donations 100000 100000 100000
Net income $107,800 $115,000
The cost-benefit analysis is given in Table 4.
Table SEQ Table * ARABIC 4: Cost-benefit analysis of in-door event
Cost-benefit analysis of in-door event
Costs
Additional S, G & A 2500
Request to accommodate 5000
Air-conditioning and lighting 10000
Premises cleaning 2000
Lower advertising and displays 5000
Unease of volunteers and organizers 5000
Loss of unlimited space 10000
Total costs $39,500
Benefits
Protection from bad weather 5000
Protection from sunlight 5000
Ability to organize programs 8000
Availability of seating 12000
Total benefits $30,000
Cost-effectiveness ratio 0.759494
Here, the cost-effectiveness ratio is less than 1, which means that the event must not be organized indoors as the costs exceed the associated benefits.
Post-event performance measurement
The actual income and variances are given in Table 5.
Table SEQ Table * ARABIC 5: Variance analysis
Budgeted income statement and variances
Price 100 Customers 150 Customers Actual Variances
Sales 80 125 160 35
Ticket 1 20 1600 2500 1600 -900
Ticket 2 25 2000 3125 1125 -2000
Ticket 3 30 2400 3750 1050 -2700
CDs 50 4000 6250 6000 -250
T-Shirts 80 6400 10000 7200 -2800
Posters 45 3600 5625 5625 0
Total sales 250 20000 31250 22600 -8650
Less: variables costs
CDs 30 2400 3750 3750 0
T-Shirts 50 4000 6250 6250 0
Posters 10 800 1250 1250 0
Total variable costs 90 7200 11250 11250 0
Contribution margin 160 12800 20000 20000 0
Less: fixed costs
S, G, & A costs 2500 2500 2500 6000 3500
Total fixed costs 2500 2500 6000 3500
Add: Donations 100000 100000 100000 120000 20000
Net income $110,300 $117,500 $134,000 $16,500
There were both favorable and unfavorable variances. There was favorable variance in the number of customers who turned up at the event. However, nearly all of the revenue categories showed unfavorable variances. These were all volume variances, as the prices were fixed. Then, there were no variances in the variable costs as these had mostly been incurred in advance. Then, these were semi-variable costs and not fully variable costs in reality. This happened as the orders for these products had to be placed beforehand and the products ready for the event. Then, these costs were variable only in their prices and not with respect to the level of sales. Finally, there was an unfavorable variance in the fixed costs as the miscellaneous general and administrative expenses turned out to be much higher than expected. Finally, there was a favorable and positive variance in the amount of donation received.
However, it is equally important to measure the qualitative factors and outcomes of the event as well. These qualitative outcomes include a super-duper mega event which was attended by 160 people, excluding the volunteers and the organizers. The quality of the concert was also great and the visitors highly appreciated the musical performances that were given. The event also got much publicity and there were a number of media and press personnel who were videotaping and following the event. Consequently, the non-profit organization got much publicity and acclaim in the newspapers for organizing such a successful event.
