Financial Plan

Budgeted income statement

The budgeted income statement for the event is given as under.

Table SEQ Table * ARABIC 1: Budgeted income statement

Budgeted income statement

  Price 100 Customers 150 Customers

Sales   80 125

Ticket 1 20 1600 2500

Ticket 2 25 2000 3125

Ticket 3 30 2400 3750

CDs 50 4000 6250

T-Shirts 80 6400 10000

Posters 45 3600 5625

Total sales 250 20000 31250

Less: variables costs      

CDs 30 2400 3750

T-Shirts 50 4000 6250

Posters 10 800 1250

Total variable costs 90 7200 11250

Contribution margin 160 12800 20000

Less: fixed costs      

S, G, & A costs 2500 2500 2500

Total fixed costs   2500 2500

Add: Donations 100000 100000 100000

Net income   $110,300 $117,500

Here, the assumption is that Sales, General, and Administrative costs will be $2,500. This will be due to the various marketing and advertising expenses born by the organizers, as well as petty cash available for miscellaneous administrative expenses.

Cost-Volume-Profit analysis

The cost-volume-profit analysis is supposed to develop the break-even sales volume and dollars for the business. In addition, the target profit method gives the volume of sales required to achieve the target profit. Finally, the margin of safety indicates as to what is the ratio of additional sales required to achieve the target. These are given in Table 2.

Table SEQ Table * ARABIC 2: Cost-volume-profit analysis

Cost-Volume-Profit analysis

   

Contribution margin 160

Fixed costs 2500

Break-even volume 15.625

   

Total sales 250

CM ratio 0.64

Break-even sales 390.625

   

Desired profit 10000

Desired profit volume 78.125

   

Margin of safety 0.8

It is also pertinent to develop a graph of the break-even point. The break-even graph is given in Figure 1.

Figure SEQ Figure * ARABIC 1: Break-even graph

The break-even graph indicates that about 15 units need to be sold in order to get a break-even.

Cost-benefit analysis

The cost-benefit analysis is done for an alternative scenario where the event will be organized in-house in an auditorium, instead of in the park. The alternative budgeted income statement is given in Table 3.

Table SEQ Table * ARABIC 3: Alternative in-door event

Budgeted income statement 2

  Price 100 Customers 150 Customers

Sales   80 125

Ticket 1 20 1600 2500

Ticket 2 25 2000 3125

Ticket 3 30 2400 3750

CDs 50 4000 6250

T-Shirts 80 6400 10000

Posters 45 3600 5625

Total sales 250 20000 31250

Less: variables costs      

CDs 30 2400 3750

T-Shirts 50 4000 6250

Posters 10 800 1250

Total variable costs 90 7200 11250

Contribution margin 160 12800 20000

Less: fixed costs      

S, G, & A costs 5000 5000 5000

Total fixed costs   5000 5000

Add: Donations 100000 100000 100000

Net income   $107,800 $115,000

The cost-benefit analysis is given in Table 4.

Table SEQ Table * ARABIC 4: Cost-benefit analysis of in-door event

Cost-benefit analysis of in-door event

   

Costs  

Additional S, G & A 2500

Request to accommodate 5000

Air-conditioning and lighting 10000

Premises cleaning 2000

Lower advertising and displays 5000

Unease of volunteers and organizers 5000

Loss of unlimited space 10000

Total costs $39,500

Benefits  

Protection from bad weather 5000

Protection from sunlight 5000

Ability to organize programs 8000

Availability of seating 12000

Total benefits $30,000

Cost-effectiveness ratio 0.759494

Here, the cost-effectiveness ratio is less than 1, which means that the event must not be organized indoors as the costs exceed the associated benefits.

Post-event performance measurement

The actual income and variances are given in Table 5.

Table SEQ Table * ARABIC 5: Variance analysis

Budgeted income statement and variances

  Price 100 Customers 150 Customers Actual Variances

Sales   80 125 160 35

Ticket 1 20 1600 2500 1600 -900

Ticket 2 25 2000 3125 1125 -2000

Ticket 3 30 2400 3750 1050 -2700

CDs 50 4000 6250 6000 -250

T-Shirts 80 6400 10000 7200 -2800

Posters 45 3600 5625 5625 0

Total sales 250 20000 31250 22600 -8650

Less: variables costs          

CDs 30 2400 3750 3750 0

T-Shirts 50 4000 6250 6250 0

Posters 10 800 1250 1250 0

Total variable costs 90 7200 11250 11250 0

Contribution margin 160 12800 20000 20000 0

Less: fixed costs          

S, G, & A costs 2500 2500 2500 6000 3500

Total fixed costs   2500 2500 6000 3500

Add: Donations 100000 100000 100000 120000 20000

Net income   $110,300 $117,500 $134,000 $16,500

There were both favorable and unfavorable variances. There was favorable variance in the number of customers who turned up at the event. However, nearly all of the revenue categories showed unfavorable variances. These were all volume variances, as the prices were fixed. Then, there were no variances in the variable costs as these had mostly been incurred in advance. Then, these were semi-variable costs and not fully variable costs in reality. This happened as the orders for these products had to be placed beforehand and the products ready for the event. Then, these costs were variable only in their prices and not with respect to the level of sales. Finally, there was an unfavorable variance in the fixed costs as the miscellaneous general and administrative expenses turned out to be much higher than expected. Finally, there was a favorable and positive variance in the amount of donation received.

However, it is equally important to measure the qualitative factors and outcomes of the event as well. These qualitative outcomes include a super-duper mega event which was attended by 160 people, excluding the volunteers and the organizers. The quality of the concert was also great and the visitors highly appreciated the musical performances that were given. The event also got much publicity and there were a number of media and press personnel who were videotaping and following the event. Consequently, the non-profit organization got much publicity and acclaim in the newspapers for organizing such a successful event.