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					Planning by the Groningen Arts
            Centre
 M987Z234: Phi Thi Loan
 M987Z247: Nguyen Mac To My
  The Groningen Arts Centre (GAC)
• The GAC is placed in the city of Groningen which is an
  important population in the north of the Netherlands and
  be ranked as one of the ten top cities in the Netherlands
• The GAC is owned by the municipality of Groningen, which
  is made up of a number of departments. One of the
  operating entities within the Art & Culture Sub department
  is the GAC
• GAC includes 4 venues:
• The large concert hall, which seats 1,200
• The small concert hall, which seats 450
• The city theatre, which seats 700
• The indoor plaza, which seats 100
                Assignments
•   Assignment 1: Contracts
•   Assignment 2: Randy Newman at Groningen
•   Assignment 3: Latvian Company
•   Assignment 4: Disappointing results
                              Contracts
• The GAC draws up contracts for the performance & concert to
  be given at its venues with 3 main types are described below:
• Variable-fee contract: The artist & the GAC receive fixed % of
  box-office receipts
    Bram de Jong gets 75% for next performance in theatre & GAC 25%
• Fixed-fee contract: GAC pay a fixed amount to the artist
    GAC pays €6,500 for a performance by Bridget Masland in theatre
• Fixed-variable-fee contract: Double Dutch performs in large
  concert hall & each ticket costs €17.50,
    Double Dutch receive: €12,500, and
    50% surplus box-office receipts, i.e. receipts from tickets sold after a
     minimum of 800 tickets have been sold.
    Last season, the last 200 tickets had to be sold at a competitive price
     of €6.25 after extra promotional activities amounting to €500
                   Assignment 1
• Fixed-fee contract: the performance by Bridget Masland
• The GAC could ask €15 for each best seat (60% of the total
  number of seats) & €10 for each worst seat (40%)
• The GAC would expect to sell about 450 to 500 tickets.
• It could raise prices, e.g. from €15 to €17.50
• Variable-fee contract: by Bram de Jong
• The comedian doesn’t want the price of a best or worst
  seat to exceed €17.50
• (?) Calculate the estimated financial results concerning the
  next performances by: the comedian Bram de Jong, the
  actress Bridget Masland & the brand Double Dutch
    By the comedian Bram de Jong (Variable-fee contract)
                      Case 1                   Case 2                   Case 3
               ( based on last year)     (based on last year)   (based on latest season)
# of seats   Best seats:               Best seats: 500          Best seats:
(unit:       60%*700 seats=420         Worst seats: 200         500
seat)        Worst seats:                                       Worst seats:
             40%*700 seats=280                                  25%*200=50
Price        Best seats: €17.50        Best seats: €17.50       Best seats: €17.50
             Worst seats: €15          Worst seats: €15         Worst seats: €15
Revenue      Best seats:               Best seats:              Best seats:
             420 seats*€17.50          500 seats*€17.50         500 seats*€17.50
             =€7,350                   =€8,750                  =€8,750
             Worst seats:              Worst seats:             Worst seats:€
             280 seats*€15=€4,200      200 seats* €15=€3,000    50 seats*€15=€750
             Total: €11,550            Total: €11,750           Total: €9,500
GAC get  25%*€11,500=€2,887.50 25%*€11,750=€2,937.50 25%*€9,500=€2,375
Comedian 75%*€11,500=€8,662.50 75%*€11,750=€8,812.50 75%*€9,500=€7,125
       By the actress Bridget Masland (Fixed-fee contract)
                  Case 1                   Case 2                     Case 3
            (based on last year)     (based on last year)     (based on latest season)
# of seats Best seats:             If 500 seats all are the   If not, then:
(unit:     60%*700 seats=420       best seats:                Best seats:
seat)      Worst seats:            500                        60%*500 seats=300
           40%*700 seats=280                                  Worst seats:
                                                              40%*500 seats=200
Price      Best seats: €15         Best seats: €17.50         Best seats: €17.50
           Worst seats: €10                                   Worst seats: €15
Revenue    Best seats:             Best seats:                Best seats:
           420 seats*€15           500 seats*€17.50           300 seats*€17.50
           =€6,300                 =€8,750                    =€5,250
           Worst seats:            Total: €8,750              Worst seats:
           280 seats*€10=€2,800                               200 seats*€15=€3,000
           Total: €9,100                                      Total: €8,250
Cost       €6,500                  €6,500                     €6,500
GAC get    €9,100-6,500=€2,600     €8,750-6,500=€2,250        €8,250-6,500=€1,750
Actress    €6,500                  €6,500                     €6,500
   By the band Double Dutch (Variable-fixed-fee contract)
                Case 1 (based on last year)       Case 2 (based on latest season)
# of seats Best seats: 1,200                  Best seats: 1,000
(unit: seat)                                  Worst seats: 200
Price       Best seats: €17.5                 Best seats: €17.50
                                              Worst seats: €6.50
Revenue     Best seats:                       Best seats:
            1,200 seats*€17.5                 1,000 seats*€17.50=€17,500
            =€21,000                          Worst seats:
            Total: €21,000                    200 seats*€6.50=€1,300
                                              Total: €18,800
Cost        Double Dutch gets: €12,500        Double Dutch gets: €12,500
            Surplus (from 801th to 1,200th    Surplus (from 801th to 1,000th ticket):
            ticket):                          200 seats*50%*€17.50=€1,750
            400 seats*50%*€17.50=€3,500       Surplus (from 1001th to 1,200th ticket):
                                              200 seats*50%*€6.50=€650
                                              Extra promotional: €500
Profit      €21,100-12,500-3,500=€5,000       €18,800-12,500-1,750-650-500=€3,400
     Assignment 2: Randy Newman at
               Groningen
• In Feb. 1999: Randy performed in large concert hall
• Ticket: were priced at €17.50 & €18.75 respectively
• Specified 3 following terms:
a. Randy receives 50% of the box-office receipts & GAC receives the
    remaining 50%
b. GAC pays a fixed amount to Randy if it were the highest bidder &
    its bid was therefore accepted
c. GAC sets a ticket price, without prejudice to the provisions under
    (a)
(?) - Specify at least 3 different bids by GAC by Randy
    - Specify con tract term which are in accordance with the terms a,
    b, and c mentioned above
    - Do a financial analysis of each contract’s advantages &
    disadvantages to GAC: indicate which bid is best, give arguments
• Three different bids by the GAC for a single performance by
  Randy: Variable –fee contract, Fixed-fee contract, and
  Variable-fixed-fee contract
• In which:
• Variable –fee contract is in accordance with term a: Randy
  Newman (& his impresario) would receive 50% of the box-
  office receipts & the GAC would receive the remaining 50%
• Fixed-fee contract is in accordance with term b: the GAC
  would pay a fixed amount to Randy (& his impresario) if it
  were the highest bidder & its bid was therefore accepted
• Fixed-variable-fee contract is in accordance with term b:
  the GAC would be allowed to set a ticket price, without
  prejudice to the provisions under (a)
    Advantages & Disadvantages
• Variable-fee contract: if all the best seats are
  full, then the sales will be very high
• Fixed-fee contract: although all the best seats
  and worst seats are full or not full, the GAC
  still has to pay a fixed amount for the
  performance
• If GAC gets this contract, it will has to pay
  other opportunity cost
• Term a: The GAC will get more profit in this case. Recall in the last
  variable-fee contract, the actress is going to get 75% for his next
  performance in the theatre and the GAC 25%. But in term a, the
  GAC is going to get 50%.
• Term b: The GAC always has to pay a fixed amount of €6,500 to the
  actress at any price as well as any # of prices sold out. Therefore, if
  the sales is less than the expectation, the GAC will get loss.
• Term c: Recall in the last fixed-variable-fee contract, the GAC has to
  pay a fixed amount of €12,500 to the actress and 50% of surplus
  box-office receipts. If the # of tickets sold out doesn’t reach to 800,
  the GAC doesn’t have to pay that 50%. Therefore, if the sales is less
  than the expectation, the GAC will get lose.
• After considering the three terms, the variable-fee contract seems
  to be the best.
               A financial analysis of each contract
                       Variable-fee contract                Fixed-fee contract
# of seats        Best seats: 60%*1,200 seats=720
(unit: seat)      Worst seats: 40%*1,200 seats=480
Price             Best seats: €18.75
                  Worst seats: €17.50
Sales             Best seats:                        Total: €21,900
                  720 seats*€18.75=€13,500
                  Worst seats:
                  480 seats*€17.50=€8,400
                  Total: €21,900
Cost              Best seats:                        From €6,500
                  50%*€13,500=€6,750                 to €12,500
                  Worst seats:
                  50%*€8,400=€4,200
                  Total: €10,950
GAC get           €21,900-10,950=€10,950             From €21,900-12,500= €9,400
                                                     to €21,900-6,500= €15,400
   Assignment 3: Latvian company
• Average capacity usage rate: 70%
• Average ticket price: €22.50
• Fir capacity usage rates on Fridays & Saturdays, i.e.
  80% on average; poor capacity usage rates on
  Mondays, i.e. 50% on average; on the other days 70%
  on average
• (?) calculate the estimated financial result of a
  performance by the Latvian
• Do a financial & policy-specific analysis of the opinions
  held by the 3 GAC executives mentioned above
• Advice to the director of the GAC
     The estimated financial result of a
        performance by the Latvian
•   # of seats: 700 seats
•   Average ticket price: €22.50
•   Average sales: 700 seats* €22.50= €15,750
•   Average sales on Sat.: 80%*€15,750= €12,600
•   Average sales on Sun.: 70%*€15,750= €11,025
•   Total average sales on Sat. & Sun.: €23,625
•   €23,625 is greater than €22,500 (compared to the
    expected average sales of Karin), therefore, the
    estimated financial result of a performance by the
    Latvian company is better than that of the three GAC
    executives.
  Disappointing result – variance analysis

• For the first two weeks of March 1999, the
  business results of the theatre were
  disappointing.
• Of this, I will base on the report of the two
  week to calculate the variance analysis for
  individual performance as well as for each
  categorization. And show that why theatre got
  unexpected result.
                                       estimated number of                   actual number of
        type        estimated price                          actual price
                                             visitors                             visitors

cabaret                       15.0                  470.0           15.0 *              390.0

cabaret                       18.0                  700.0            18.0               675.0

cabaret                       16.0                  620.0            16.0               400.0

cabaret                       14.0                  510.0            14.0               590.0

theatre                         9.0                 580.0              9.0              560.0

theatre                       10.0                  540.0            10.0               650.0

theatre                       13.0                  500.0            13.0               350.0

theatre                       10.0                  450.0            10.0               570.0

opera                         30.0                  480.0          30.0 **              520.0

opera                         26.0                  450.0            26.0               560.0

congress                      20.0                  550.0            20.0               430.0

anniversary                   30.0                  600.0            30.0               525.0

   * 20% of the tickets were sold at a discount of 25%
   ** Half of the tickets sold were at a discount of 10%
                                estimated
• Estimated           type
                                 revenue
                                             actual revenue Revenue variance
  revenue =       cabaret            7,050.0          5,557.5       (1,492.5)
  estimated       cabaret           12,600.0        12,150.0          (450.0)
                                     9,920.0         6,400.0         (3,520.0)
  number of       cabaret
                  cabaret            7,140.0         8,260.0          1,120.0
  visitors *      Total
                                    36,710.0        32,367.5        (4,342.5)
  estimated       cabaret
                                     5,220.0         5,040.0          (180.0)
  ticket price.   theatre
                  theatre            5,400.0         6,500.0          1,100.0
• Actual          theatre            6,500.0         4,550.0         (1,950.0)
  revenue =       theatre            4,500.0         5,700.0          1,200.0
  actual          Total
                                    21,620.0        21,790.0            170.0
                  theatre
  number of       opera             14,400.0        14,820.0            420.0
  visitors *      opera             11,700.0        14,560.0          2,860.0
  actual ticket   total opera
                                    26,100.0        29,380.0          3,280.0
  price.          congress          11,000.0         8,600.0        (2,400.0)
                  anniversary       18,000.0        15,750.0        (2,250.0)
Price variance = (actual price – estimated price) * actual number of visitors
Quantity variance = (actual number of visitors – estimated number of visitors) * estimated price
of ticket

        type       revenue variance price variance (revenue)   quantity variance (revenue)

                           (1,492.5)             unfavorable         (1,200) unfavorable
   cabaret                               (292.5)
   cabaret                   (450.0)           - favorable             (450) unfavorable
   cabaret                 (3,520.0)           -   favorable         (3,520) unfavorable
   cabaret                   1,120.0           -   favorable           1,120 favorable
   total cabaret           (4,342.5)     (292.5)                     (4,050)
   theatre                   (180.0)           -   favorable           (180) unfavorable
   theatre                   1,100.0           -   favorable           1,100 favorable
   theatre                 (1,950.0)           - favorable           (1,950) unfavorable
   theatre                  1,200.0            - favorable             1,200   favorable
   total theatre              170.0         0.00                        170

                              420.0              unfavorable           1,200   favorable
   opera                                 (780.0)
   opera                     2,860.0           - favorable             2,860 favorable
   total opera               3,280.0     (780.0)                       4,060
   congress                (2,400.0)           - favorable           (2,400) unfavorable
   anniversary             (2,250.0)           - favorable           (2,250) unfavorable
     type         Contractual cost               Fixed cost                 extra cost types
                  Type of contract                             Staff cost             Catering cost

              lump sum
cabaret                                  6000            600       -                           -
              price ppv
cabaret                                    16            600       -                           -
                mix
cabaret                       5000 + 6 ppv               600       -                           -
              lump sum
cabaret                                  6000            600       -                           -
              lump sum
theatre                                  4500            600       -                           -
              Price ppv
theatre                                     8            600       -                           -
              price ppv
theatre                                    10            600       -                           -
                mix
theatre                       1000 + 6 ppv               600       -                           -
              Lump sum
opera                                    12000           600       -                           -
              price ppv
opera                                      23            600       -                           -
                  -
congress                             -                   600            8,000       15 per possible visitor
                  -
anniversary                          -                   600           15,000       20 per possible visitor
 Lump sum: cost was unchanged for estimated and actual
 Price ppv = contractual cost * number of visitors
 Mix = lump sum + (price ppv * number of visitors)

                                         contractual cost
          type                                                   cost variance (from
                     estimated cost        actual cost
                                                                      quantity)
cabaret                          6,000                   6,000                         -
cabaret                        11,200                10,800                     (400)
cabaret                          8,720                   7,400                (1,320)
cabaret                         6,000                 6,000                            -
total cabaret                  31,920                30,200                  (1,720)
theatre                          4,500                   4,500                         -
theatre                          4,320                   5,200                   880
theatre                          5,000                   3,500                (1,500)
theatre                         3,700                 4,420                      720
total theatre                  17,520                17,620                      100
opera                          12,000                12,000                            -
opera                          10,350                12,880                    2,530
total opera                    22,350                24,880                    2,530
     type         Contractual cost               Fixed cost                 extra cost types
                  Type of contract                             Staff cost             Catering cost

              lump sum
cabaret                                  6000            600       -                           -
              price ppv
cabaret                                    16            600       -                           -
                mix
cabaret                       5000 + 6 ppv               600       -                           -
              lump sum
cabaret                                  6000            600       -                           -
              lump sum
theatre                                  4500            600       -                           -
              Price ppv
theatre                                     8            600       -                           -
              price ppv
theatre                                    10            600       -                           -
                mix
theatre                       1000 + 6 ppv               600       -                           -
              Lump sum
opera                                    12000           600       -                           -
              price ppv
opera                                      23            600       -                           -
                  -
congress                             -                   600            8,000       15 per possible visitor
                  -
anniversary                          -                   600           15,000       20 per possible visitor
Estimated extra cost = staff cost + (catering cost * estimated number of visitors)

Actual cost = staff cost + (catering cost * actual number of visitors)

we can see that the difference between estimated and actual extra cost was just
due to the quantity of visitors


                                                extra cost
          type
                      estimated
                                       actual cost           extra cost variance
                      extra cost


  congress                   16,250           14,450           (1,800)   favorable

  anniversary                24,000           25,500            1,500 unfavorable
                           40,250.0         39,950.0           (300.0)
  Total
          estimated      actual        revenue       price variance quantity variance
  type
           revenue      revenue        variance        (revenue)       (revenue)


TOTAL     113,430.0    107,887.5      (5,542.5)         (1,072.5)         (4,470.0)



                 contractual cost                                   extra cost
                                 cost        fixed
  type
         estimated             variance      cost      estimated     actual      extra cost
                   actual cost
            cost                (from                  extra cost     cost        variance
                               quantity)


TOTAL     71,790.0 72,700.0                             40,250.0 39,950.0
                                    910.0   7,200.0                               (300.0)
                  Implication

• In general, the total cost was not changed too
  much (cost increased by about $600), but the
  revenue decreased more than 5,500 => as the
  result, an unexpected result was unavoidable.

• Base on the variance analysis, the decrease of
  revenue was because of the decrease of quantity
  of visitors. Therefore, the theatre should build a
  policy which would attract more customers.

				
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