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Mangerial Accounting Danshui Case

At current stand point Craddock Cup is facing a loss, after analyzing the relevant and irrelevant costs to determine the financial impact if the cup was discounted. Total exposes are currently $53,538, hence the elimination of irrelevant, or unavoidable, costs when deciding whether the Cup should continue .The irrelevant, unavoidable costs include Rivaldo’s salary allocated to the tournament ($6,300), the field rental cost for the week ($1,200), and the rent/utilities expense for the Cup ($2,700). When these costs are added, we get $10,200 that cannot be avoided regardless of the continuation of the Craddock Cup. Following this further after subtracting the irrelevant costs from the total costs it equals to $43,338. In results there is a profit of $6502, which is greater than if the tournament would shutdown. Organize a deal with a hotel/s where you arrange accommodation for all the players. In return for the extra business the hotel/s offer you free or discounted accommodation for the college scouts. | Breakeven analysis and contribution margin. If the variable cost of putting the college scouts in hotels (which is a large cost of $4,000) could be eliminated or reduced significantly it would greatly affect the contribution margin of the cup (CM = Sales – VC) as variable costs would decrease significantly. It would also decrease the breakeven point in revenue. | Issues could include the problem of finding a hotel or hotels that will be able to provide enough accommodation for the large amount of players and that will agree to the proposal as the hotel or hotels may feel they will be able to attract the players on their own accord and do not need to avoid losing the additional profit of the scouts by doing so. | 86-88, 90-91, 94 |


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