Answered: In one year, the Arizona Diamondbacks…

Business

Accounting

In one year, the Arizona Diamondbacks (AD) signed many free agents, and the ball club had to pay a big amount of salari

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 16PB: At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The...

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Question

In one year, the Arizona Diamondbacks (AD) signed many free agents, and the ball club had to pay a big amount of salaries. AD figured out its break-even point. AD had to have 40,000 fans for each home game just to break even. AD is franchised in Phoenix, Arizona, which is not a big market. Therefore, drawing 40,000 people to each game would be impossible. So AD lowered the break-even point by raising the ticket prices. Ironically, AD did that during a fan appreciation weekend. What a great way to appreciate fans! In that year, the attendance dropped by nearly 10%, and Ad’s income dropped by nearly 100%. Why is it that the profit declined so much, given just a 10% drop in attendance? (CVP Analysis)

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