Analyses Of Cost And Desired Returns By DOSM Shows: Trade Show And Yoga Event Assessment Answer

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Question :

Case study:

Dalton Events have got offers for events to be conducted during the Christmas holidays in different cities. The DOSM has got offers from two different organizations to conduct the event. The possibility is that they can only accept one offer as they are all on the same day in different suburbs.

As the revenue manager of Dalton Events Australia Pvt Ltd, events management company based in Melbourne, you are asked by your DOSM to critically evaluate the following and report on the same by categorizing costs and critically appraise & evaluate cost drivers with emphasis on cost drivers in relation to which offer is best acceptable for the business.

1. The First event is a trade show to be held in Melbourne on the 20th Of December. The event is all about One massive day of tattoos, art  and  entertainment,  the  venue  chosen  in Melbourne Exhibition Centre. International tattoo artists together under one roof to showcase their work. Visitors will have the chance to meet their next (or first!) artist, research the latest trends, and even treat themselves to a tattoo on the spot. Their requirements on that day of event are as follows.

  1. They need a rock band to play from 10.00 am till late 6 pm
  2. Video Production
  3. Event Staff
  4. 3000 chairs
  5. Signages
  6. Social media marketing
  7. Light refreshments ( soft drinks and snacks)

They are expecting: Participants: 8000 Visitors and 300 Exhibitors. The venue rent would be paid by the Australian Tattoo Association thus Dalton Events has to only collect the entry fees and provide their service as an event organiser. These are the following information that Daltons DOSM has researched and collected from last years event that was organised by another company. The entry fee was $135 per ticket

CategoryProjected
subtotal
Comments
Venue related
costs


Location rentalnilThis is paid by the associations
Event staff

$26,400.00
They have used 100 staffs to control that days crowd. Each staff was be paid at $24 per hour excluding half an hour break. They start
from 8 am and run until 7.30 pm. All these




staffs are casuals (remember they also need to
be paid superannuation’s as well which is 9.5 %)
Different equipment rental$40,000.00They need to rent different equipment’s for
lifting chairs , tables , setting up kiosk etc
Decorations$200,000.00DOSM is expecting a rise of 10%
Lighting$150,000.00There seems to be no changes
Additional signage$30,000.00NO changes
Speakers$12,000.00No changes
Rock band performers fee

$30,000.00
This time they are inviting a different band so its expected to add another $18000 to the
previous year price
Video production$25,000.00This is expected to also increase by 22%
Chairs$12,000.00Each chair will cost them $6



Social media
costs


Twitter$2,500.00



They are expecting an increase in social media marketing price by 15% for each
Facebook$3,000.00
Pinterest$1,200.00
Instagram$4,000.00
Google+$2,500.00
Linkedin$3,000.00
Snapchat$750.00
Advertising




Print$8,000.00They are reducing the printing cost by 25%
Outdoor$40,000.00They are promoting on billboards thus an
increase by 40 % is expected
Radio$6,000.00
They are advertising using all the radio
stations which would add another $12000
Television$10,000.00No changes here as they are using the airing
time



Drinks$4,000.00This is deemed to reduce by 10 %
Snacks$6,000.00Snacks are increasing by 12 %


2. The second event is a YOGA event in Melbourne Showgrounds by the world famous Yoga trainer Vasudev

DROP-IN MEDITATION: The YOGA sessions are from 10.00 am till 5 p.m. In each class a different aspect of meditation is explained. Yoga Instructors would provide more information and no age limit is mentioned. No meditation experience is necessary, the classes are suitable for beginners and experienced meditators.

Everyone is welcome the event in the show grounds. The entry fee collected last time was 122 $ Their requirements on that day of event are as follows.

  1. They need an Indian classical band to play from 10.00 am till late 5 pm
  2. Video Production
  3. Event Staff
  4. 8000 mats
  5. Signages
  6. Social media marketing
  7. Light refreshments (soft drinks and snacks)
  8. Yoga matts
  9. 20 live Display screens

(The requirement is the same except changes is few)

They are also expecting: Participants: 8000 Visitors and 300 Exhibitors. The venue rent would be not be managed by the Australian Yoga Association thus they Dalton Events has to understand that they need to collect the entry fees and provide their service as an event organiser. These are the  following information that Daltons DOSM has researched and collected from last year’s event that was organised by another company which the providers are not satisfied by their service last time. There are 3 other big event organisers also tendering for this.

CategoryProjected subtotalComments
Venue related costs

Location rental$40,000They are expecting a 5% increase





Event staff





$36,000
They have used 150 staffs to control that days crowd. Each staff was be paid at $24 per hour excluding half an hour break.
They start from 8 am and run until 6.30 pm. All these staffs are casuals (remember they also need to be  paid superannuation’s as well which is 9.5 % so please add them in later costs) - Dalton is going to increase the no of staff to 200 as they think they need to provide better customer  service keeping the payrate same

Different equipment rental

$45,000
They need to rent different equipment’s for lifting chairs , tables , setting up kiosk etc
Decorations$175,000DOSM is expecting a rise of 50%
Lighting$140,000There seems to be no changes
Additional signage$60,000NO changes
Speakers$42,000the cost is increasing by 12%

Indian Yogic music

$16,000
This time they are inviting a different band so its expected to add another
$8000 to the previous year price
Video production$18,000This is expected to also increase by 22%

yoga mat

$48,000
Each yoga mat will cost them $6 , as they cannot be rented . They included this in the pricing for the entry fees. This time its costing them only 5.50



Social media costs

Twitter$2,500They are expecting an increase in social media marketing price by 15% for each
Facebook$3,000
Pinterest$1,200
Instagram$4,000
Linkedin$3,000


Advertising

Print$4,800They are reducing the printing cost by 25%
Outdoor$22,000They are promoting on billboards thus an increase by 40 % is expected

Radio

$5,400
They are advertising using all the radio stations which would add another
$12600
Television$2,000the new charges is 10000



Drinks$8,000This is deemed to reduce by 10 %
Snacks$7,000Snacks are increasing by 12 %

The DOSM wants you to Investigate, analyse and differentiate cost related to pricing and cost control techniques according to the various cost drivers and behaviours the costs that can be controlled and reduced to make more profit by not compromising on service.

Required:

Task 1: Categorize costs and critically evaluate which costs are cost driven. (sales driven) (750 words) (10 marks)

(Categorise the cost according to the cost drivers and explain the DOSM what are the cost driven expenses)

Task 2: Differentiate cost related to pricing and cost control techniques according to the various cost drivers and behaviours (750 words) (10 marks)

Evaluate and analyse which costs are directly related to pricing and the cost control techniques on how these costs can be controlled so that they can earn more profit

Task 3: Discuss with emphasis on cost drivers in relation to which offer is best acceptable for the business ( 15 marks)

(Considering the estimated expenses for the business calculate the entry fee per person considering the DOSM prefers 35% margin on the total cost estimated for each event and analyse the individual event to estimate and tell how many tickets they need to sell so that they can break even. Also analyse and find out which event is going to be profitable to accept and how as a Revenue manager you can come to the decision of choosing one event )( please use Excel program where possible to analyse and budget the cost and pricing and copy your findings to word and write your report accordingly)

Presentation with no errors is awarded 5 marks

(you can use Microsoft excel to work on your assignment and import it to Microsoft word when writing your report . Please use proper referencing where needed using APA style)

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Answer :

Case Study


Dalton Events have got offers for events to be conducted during the Christmas holidays in different cities. The DOSM has got offers from two different organizations to conduct the event. The possibility is that they can only accept one offer as they are all on the same day in different suburbs. The report critically evaluates the cost of the two events with emphasis on the cost drivers and recommends the best acceptable offer for the business.

The First event is a trade show to be held in Melbourne on the 20th Of December. The event is all about one massive day of tattoos, art and entertainment, the venue chosen in Melbourne Exhibition Centre. The second event is a YOGA event in Melbourne Show grounds by the world famous Yoga trainer Vasudev.

A. Cost Categorization and the cost analyses:

The cost structure of any business describes all the cost incurred to run the business. Cost driven business models aims at minimizing the cost to maximize the profits without compromising the quality of the services. Dalton aims at analyzing the cost and minimizing them wherever possible. The cost structure divides the cost broadly into Variable cost and Fixed Variable cost (E commerce-digest.com , 2019)

Variable cost: This cost varies with the production of the level of services and hence is driven by sales.  The variable costs are directly proportional to the sales and services and hence are known as the sales driven costs. 

The broad category of costs  are:

1. Staff Cost
2. Equipments & Material Costs:
3. Social media Costs:
4. Advertising:
5. Drinks & Snacks:

In these categories of cost, the cost drivers are analyzed as follows (Claessens, M., 2015):

1. Staff cost: the no of staff required for the event depends upon the visitors and the support required from the staff to manage the event. The bigger the crowd of visitors the more staff is required and hence the staff cost is driven by the sales or footfall to the event. The cost is also driven by the duration of the event. The longer time of the event will require higher payment to the staff as they are paid on hourly basis. 

The trade show will be for 11 hours excluding the half hour break while the Yoga event will be for 10 hours. Thus the payment to staff will be higher for trade show. However the no of staff required for Yoga event are double the staff required for the trade show and hence the cost of staff for the yoga event is higher than trade show. The superannuation cost of 9.5% also varies with the change in cost of staff.

2. The equipment and material costs are almost fixed except for the chairs and yoga mat cost. This cost is directly related with the visitors and hence will be more of the visitors expected are more. The other cost like the equipment cost, decorations and lighting are nearly fixed for the venue and hence are not driven by sales.

3. The social media costs include the cost of publicizing the event on social media. The cost is nor driven by sales and is foxed for every medium and the event. However the cost varies with the number of social mediums used for publicizing the event. Like the trade show will be publicized on 7 social platforms like Twitter, Facebook, Pinterest, Instagram, Google+, Linkedin and Snapchat. While the Yoga event will be publicized only on 5 mediums excluding Google+ and snapchat. Thus the Social media cost of Yoga event is less than the trade show.  The Social media cost is driven by the social media platforms used for publicizing the event. 

4. Advertising cost:  The cost depends upon the mode of advertisement used and the frequency of these. The two events will be advertised though Prints, Outdoor billboards Display, Radio and television. The two events uses the similar modes for advertising, however the cost differs because of the frequency of no of boards used for advertising. The radio and television cost of both the event is same. But the Billboards display cost of trade show is higher than the Yoga event because it will use more display boards for the show. 

5. Drinks and snacks Cost: The cost is completely sales driven. The more no of visitors to the event will lead to more usage of drinks and snacks and hence higher costs. The cost is higher for yoga event considering that more healthy drinks and snacks rather than junk will be provided at the event.  

B. Cost related to Pricing and cost controlling techniques:

Cost based pricing is the technique which helps in pricing the products or services. Since the costs of the operations need to be recovered for breakeven, it is important that the costs sets the floor for the pricing of the services the business provides. 

The analysis of cost the previous section identifies the drivers of cost. It is observed that the equipment cost except for chairs and yoga mats, advertisement costs and social media cost are driven by the event requirements and the event organizers plan to run the event. The equipment’s, lighting and decoration are completely the organizers need. Similarly, the extent of use of social media and advertisements depends upon the organizers of the event to the extent to which they plan to advertise their event (Gartenstein, D., 2019).

Other costs like staff cost, drinks and snacks and chairs and yoga mat are driven by the visitors to the event.

However, all the costs are necessary for pricing for the event. Hence the total cost be it fixed or variable cost will be considered for pricing of the event tickets. In the event of trade show the cost of the venue will be borne by the Australian Tattoo Association thus Dalton Events will only have to bear the organizing expenses. While in the yoga event, the venue will not be paid by the Australian Yoga Association and hence Dalton Events will have to bear the cost of rent of the venue. The pricing of the tickets for the Yoga event will include the cost of the rent of the venue. 

Thus for pricing of tickets for the Trade show the total cost of $697,221 will be considered and for the pricing of the tickets of the yoga event the total cost of $790,255 will be considered. 

Cost controlling techniques includes the methods of cost control by assessing the utility of the cost and value addition made by the cost. The costs that do not add value to the product or service can be easily reduced. Similarly sometimes the outsourcing can also result in reduction in cost as the activities are outsourced to the companies who are providing exclusively the services and have core competence to perform the activity at lower cost.

 The review of the cost of the two events reveals that the cost of decoration in the Yoga event is very high. The event is supported by the thought of living a simple life and close to nature. Hence the lighting and decorations does not add much value to the vent and the cost can be reducing by reducing these expenses.  The event can be decorated with plans and trees more than lights and other items to make it more simple and attractive for the yoga sessions.

Second cost is the cost of Yoga mats in the yoga event. The mats are not available on rent and hence Dalton will have to purchase the mats. They plan to include the cost of mats in the cost of the tickets. However, not every one might be interested in buying the mats as they may be already having them. Also the purchase of 8000 mats is increasing the cost. The visitors will be evenly distributed though out the day and there will be more than 2000-3000 visitors in one session. Thus the purchase of mate can be reduced to 3000 and they can be used by the people in the next session. The visitors can be given the option to buy the mats if they wish for  the extra payment of $6 per mat. This way the total investment in the mats will be reduced and the ticket cost can be reduced to make it more attractive to the visitors. 

The cost of drinks and snacks can also be reduced by offering plain water in drinks and no snacks. The snacks and drinks are driven by personal choice of people and hence the event can have a small sale counter with various drinks and snacks at cost. Thus the visitors will buy snacks and drinks of their own choice at the MRP. 

C. Pricing of the Tickets:

The revised cost of both the events is as follows:

Trade showYoga Event
Expenses: 
















Venue Rent

$0



$42,000
Staff Cost:







Event Staff$24 per Hour X 11 hours100$26,400
$24 per Hour X 10 hours200$48,000
Superannuation of staff@9.5%
$2,508
@9.5%
$4,560




$28,908


$52,560
Equipments & Material Costs:







Different equipment rental

$40,000


$45,000
Decorations

$220,000


$262,500
Lighting

$150,000


$140,000
Additional signage

$30,000


$60,000
Speakers

$12,000


$47,040
Rock band performers fee

$48,000


$24,000
Video production

$30,500


$21,960
Chairs/ Yoga Mats$6 3000$18,000
$5.50 8000$44,000




$548,500


$644,500
Social media Costs:







Twitter

$2,875


$2,875
Facebook

$3,450


$3,450
Pinterest

$1,380


$1,380
Instagram

$4,600


$4,600
Google+

$2,875




Linkedin

$3,450


$3,450
Snapchat

$863








$19,493


$15,755
Advertising:







Print

$6,000


$3,600
Outdoor

$56,000


$30,800
Radio

$18,000


$18,000
Television

$10,000


$10,000




$90,000


$62,400
Drinks & Snacks:







Drinks

$3,600


$7,200
Snacks

$6,720


$7,840




$10,320


$15,040
Total Costs


$697,221


$790,255

The cost for both the events has been calculated as above. It is observed that the cost of  Yoga event is more than the cost of trade show. The yoga event has the higher cost because of venue rent. The cost is also higher due to more staff required to monitor the event. The staff required are 200 for the event though they are just 100 for the trade show. The equipment cost is also high due to high decorations expense, more cost of mats and speakers cost needed for announcements during yoga sessions. 

Thus considering the cost and cost drivers the trade show is a more profitable event for Dalton Events. The event requires less staff and less expense on equipments which form a major portion of expense. Also for the trade show Dalton need not pay the venue rent which will be paid for the yoga event. 

Entry Fee and break-even point

Considering that DOSM prefers 35% margin on the total cost estimated for each event, the price of each ticket considering there will be 8,300 participants for both the events is calculated as follows:




Trade ShowYoga Event





Total Costs

$697,221$790,255





Expected Profit Margin35% on total cost$244,027$276,589





Required Revenue

$941,248$1,066,844





Total no of Participants

83008300





Ticket fee per participant  $113$129





To earn the desired profit the entry ticket for the Trade show should be priced at $113 per ticket and  for the  Yoga event it should be priced at $129 per ticket

In order to breakeven the Trade show should sell :  $697,221/113 = 6,149 tickets

In order to breakeven the Yoga event should sell :  $790,255/129 = 6,149 tickets

Thus at the given ticket price of $113 and $129 for the Trade show and the Yoga event respectively, Dalton should sell 6149 tickets of each to break even.

Assumptions: The following assumptions are made-

  • The entry ticket fee will be collected from both the visitors and the exhibitors
  • Since all the cost incurred is for the event specifically all the variable cost for the breakeven point

Conclusion and Recommendation

 The detailed analyses of all the cost and desired returns by DOSM shows that the trade show ticket should be priced at $113 per ticket while the Yoga event ticket should be priced at $129 per ticket.

The last year ticket price of Trade show was $135 per ticket and for the yoga event it was $122 per ticket.

It is observed that  DOSM can make the desired profit by pricing the ticket of the trade show lower than last year, while the ticket of the yoga event needs to be priced higher than the last year in order to earn the desired profit.

In view of above it is recommended that Dalton should accept the Event 1 of Trade show to be held in Melbourne on the 20th Of December. The event will be more successful as the ticket will be priced less than the last year ticket price and still will give desired profit. In case of Yoga event, it is more cost consuming for the company and in order to earn the desired profit the ticket price will be than last year leading to possibilities of less success. Also the other big event management companies may offer to organize the event at last year’s price or even less.

Thus it is recommended that Dalton accepts the Trade show event and prices its ticket at $113 per ticket.