Alltel

Only available on StudyMode
  • Download(s): 108
  • Published: June 7, 2012
Read full document
Text Preview
1. How would you describe the competitive strategy of the ALLTEL Pavilion? Given the firm's strategy, what are the most important Key Performance Indicators (e.g., quantitative measures) for the Pavilion to track and manage if it is to achieve its goal of continuous annual growth in operating income? ALLTEL Pavilion is operated by SFX Entertainment in an outdoor atmosphere for its customers. ALLTEL attempts to create a competitive advantage as the major outdoor concert venue in the "Triangle" area of North Carolina consisting of Raleigh, Durham, and Chapel Hill. The amphitheater has art-like acoustics and video differentiating the venue with trying to keep costs budgeted for each concert. The Key Performance Indicators are based on advertising media. They have researched on the most effective advertising in each region of the state in order to maximize ticket sales with the least advertising costs, which eventually create profitability. Other items include customer satisfaction, parking, and concessions. 2.) Complete two selected cost-volume-profit analyses for the show illustrated in Exhibit 2, the KFBS Allstars: A. How many tickets must the ALLTEL Pavilion sell to break even? (Hint: don't ignore the possibility that the attendance of Comp ticket holders affects the concert's profitability.). (4:1 sales mix tickets of paying : comp) Break-Even = $0 = 4x($40.08-$3.05) + 1x($13.09-$3.05) - $263,245 x = 1664.42 sales mix packages 1(1664.42) = 1665 comp tickets 4(1664.42) = 6658 paying tickets = 8323 total tickets i.) Do you think that it is likely that the Pavilion will break even? Briefly explain. Yes, ALLTEL will likely break even. To make a profit ALLTEL has to sell over 8323 total tickets with the projected number of sales tickets is 10,349 total. ii.) Given your estimated breakeven point in units, compute the Margin of Safety (MOS) in units. Briefly comment on the MOS result. MOS units = #of total tickets - # of Break Even Tickets MOS units = 10,349 8323 MOS units = 2026 tickets This means there is 2026 projected number of tickets over the Break Even number of sales tickets and sales tickets can drop the projected amount 2026 tickets before losing profit. B. How many tickets must ALLTEL Pavilion sell to earn $30,000 operating income after taxes, assuming a 40 percent tax rate? Is it reasonable to assume this level of operating income will be achieved? Briefly explain. $30,000 / (1-0.40) = 4x($40.08-$3.05) + 1x($13.09-$3.05) - $263,245 $30,000 / (1-0.40) = x($158.16) - $265,245 $30,000 = x($94.896) - $157,947 $187,947 = x($94.896) x = 1980.5577 tickets 1(1980.5577) = 1981 comp tickets 4(1980.5577) = 7923 paying tickets in order to earn $30,000 Operating Income after taxes The total number of 7923 paying tickets is reasonable to be achieved, although it is above the number of 7000 tickets that the reserved seating can actually hold at ALLTEL Pavilion. 3. What should be the average ticket price (for all ticket types combined--A through D) for the KFBS concert if the fixed-pay fee is $200,000 (rather than $160,635) and the Pavilion expects to sell 7,000 tickets and wants to earn $30,000 operating income after 40 percent in taxes? After you estimate the average ticket price for all ticket types combined (which is $22.12 for the situation depicted in Exhibit 2), estimate the price for each type of seat (i.e., in Exhibit 2: A-$36.29, B--$22.22, C--$11.31, D--$4.92). [Hint: assume the sales mix for A, B, C, and D seats remains the same as the mix in the Flash Report (Exhibit 2).] $30,000 / (1-0.40) = 7000 ($13.09 - $3.05) + 7000 (x - $3.05) - $200,000 $30,000 / (0.60) = $70,280 + 7000 (x - $3.05) - $200,000 $50,000 + $200,000 - $70,280 = 7000 (x - $3.05) $179,720 / 7000 = (x - $3.05) x = $28.72 A seats = $36.29 / $22.12 * $28.72 = $47.11 B seats = $22.22 / $22.12 * $28.72 = $28.85 C seats = $11.31 / $22.12 * $28.72 = $14.68 D seats = $4.92 / $22.12 * $28.72 = $6.39 4. Negotiating the fee for the KFBS Allstars is an...
tracking img