17351120802 and the 10 of revenue contracting fee for

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merchandising ($.191+.766+.352)The above approach ignores the contribution of “comp” tickets and uses only paying ticket holders. However, comp patrons should not be ignored because the also pay for parking and buy food and merchandise. Thus, a preferred approach would be to include directly in the analysis the fact that “comp” ticket holder’s will pay for parking, food, and merchandise, as follows:a) The contribution per paying customer is $37.03 = $42.08-$3.049b) The contribution for each comp customer is $10.04 = $13.09 – $3.049,where $13.09 = $1.91+7.66+3.52The equation to solve for the number of paying customers (Q), would then be based on the assumption that an additional 25% of comp customers would also attend:$37.03 x Q + $10.04 x .25 x Q = $263,245 at breakevenQ = 6,658 paying customers who will be in attendance with an additional approximate.25x 6,658 = 1,665 comp customers.Assumptions and Discussion PointsThe above analyses assumes a constant purchase mix of ticket types, as set out in Exhibit A. Also, there are a number of other key assumptions.1. Our solution assumes that the $1.74 of other variable expense applied to both paying ticket holders and comp ticket holders. That is, the COGS for the concessions and insurance are applicable to each customer, whether paying or not. Some students will note that the Flash Report provided to me by Alltel Pavilion staff is inconsistent with this because it shows project variables expense of $1.74 x 8,251 =$14,323. The Alltel staffs’ calculation seems to imply that only paying customers cause these costs. I decided to leave this discrepancy in the case to add some realism – I can add it to the class discussion and use it to reinforce the importance of accuracy and consistency; depending on my goals for the class I might correct this number in the case and replace the $14,323 with the correct calculation of $1.74 x 10,349 = $18,007..2. In my experience with the case, a number of students will assume the costs provided in the Flash Report for the ancillaries (parking, food, and merchandise) are fixed costs only. I remind them of the case information that states that the concession contractors are paid on a basis of both a fixed fee and a percentage of revenue (and therefore a variable cost). After a question or two the class seems to then understand this point.3. Relatively few students attempt to account for the ancillary revenues from the comp ticket holders in their initial analysis. I allow plenty of time to explain this point.
4. Some students fail to see that the revenue per ticket includes both ticket price (avg of $22.12) and other payments to Alltel Pavilion based on tickets sold (facility charge and S/C rebates), so that the relevant figure to use is $26.99 per paying ticket holder.

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