2_ Midwest College Beer Sale Pilot Program
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School
Western Michigan University *
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Course
2420
Subject
Industrial Engineering
Date
Feb 20, 2024
Type
docx
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3
Uploaded by DeaconSnake481
Memorandum
To: Rosanna Luchan, Director of Athletics Shane McClellan, Hannah Lomax, Max Marzolf, and Alexis Olszewski
Date: 8th March 2023
Analysis of the Midwest College Football Pilot Program for Beer Sales
This memo analyzes the pilot program for alcohol sales at college football games in at Midwest College. The pilot program was designed to assess the viability of selling beer at home events on an ongoing basis.
Expenses for the Pilot Program
The following are the pilot program's expenses:
$9000 for the rental of beer garden apparatus
Assurance: $2,000
Beer costs $1.55 per pint
The pilot program cost a total of $11,550.
Profitability of the Pilot Program
The pilot program generated a net profit of $6,206. The calculation was as follows:
(sales - variable costs - fixed costs) = net profit
In the pilot program, 806 beers were sold for $9 each, for a total of $7,254. The variable cost per beverage was $1.55, making the total variable cost $1,248. The fixed expenses
totaled $9,000. In conclusion, the net profit was $6,206.
Required Attendance to Break Even
The requisite attendance for the pilot program to break even was 5,263. The calculation was as follows:
Breakeven attendance = (fixed costs plus variable costs) / (sales price - variable costs).
In the pilot program, fixed costs were $9,000, variable costs were $1.55 per beer, and the selling price per beer was $9. Therefore, the required attendance to break even was
5,263.
Budget for Beer Garden Equipment for a Long-Term Program
If Midwest College were to implement a long-term beer sales program at home football games, they could allocate up to the following amount for beer garden equipment and still earn a profit over a six-game season:
Budget for beer garden equipment equals (total revenue minus total variable costs minus total fixed costs) divided by six.
In this equation, total revenue equals the product of the number of beverages sold times
the price per beer. The total variable costs equal the number of sold beers multiplied by the variable cost per sold beverage. The fixed costs equal the pilot program's fixed costs plus the cost of employing additional security for each game.
If attendance matches last year's average of 11,000 per game and the pilot program accurately identifies the demand for beer, the budget for beer garden equipment would be as follows:
Beer garden equipment budget = (11,000 beers * $9/beer) - (11,000 beers * $1.55/beer)
- $9,000 - $12,000 = $63,000
Therefore, Midwest College could allocate up to $63,000 for beer garden equipment during a six-game season and still turn a profit.
I trust this analysis is informative. Please reach out if you have any inquiries.
Sincere regards, Shane McClellan, Max Marzolf, Hannah Lomax, and Alexis Olszewski Analysis Group
Revenue
Amount
Number of beers sold
806 beers
Price per beer
$9/beer
Total revenue
806 beers * $9/beer = $7,254
Total cost
$12,249.30
Net profit
$7,254 - $12,249.30 = $1,539.70
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