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In the uploaded exel file there is a financial analysis of the Annie Smith Dance Center. I have analyzed the annual activity of this center and would like to show the results.
With the number of concerts that the center has today we have:
Profit = Revenues – Total Costs = 1 627 500-(765 000+253 000 +515 000) = - 94 500$
It means that the center incurs losses.
I have computed the break even point of number of performances for each type of dance. The results are on lists 2-5 in the exel file.
I would like to say some words about the shortcomings of multi-product analysis. According to the Business Owner's Toolkit (2013), the main shortcoming is that in multi-product analysis all the products are considered to be equal. It ignores customers’ preferences. In our case there four different types of dance performances. The multi-product that I have made also assumes that all the types of performances have the same value for customers. But of course it is not true. The best way to stand this statement is to show at Christmas Performances. According to break even analysis there should be performed only one dance show. In reality, this type of performance is the highest demanded: there are 100% of sold tickets. That is why it becomes obvious that, in order to make more profit, it is necessary to increase the number of Christmas performances.
What concerns the effects of demand and resources on this type of analysis it is necessary to admit that they are not taken into consideration (2008, 182-184). I have already mentioned that all types of products in multi-products analysis are considered to be equal and at the same demand. The client’s’ expectations and preferences are not considered. As well as resources. This analysis assumes that organization has an unlimited access to all resources.
As a result I can say that multi-product analysis does not reflect the market or product specification. Its results cannot be considered as a strategy for organization activity. It shows
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only general information. Nevertheless, such analysis is very important for organization. High management will find it useful and informative. First of all, such analysis shows how to avoid losses for organization. In our case we find out the break even points of number of performances for the dance center. The comparison between obtained results and the real situation will show the weak points of organization (Cost Volume and Profit Relationships). High management will be able to revise the program of performances according to the analysis.
I would like to recommend some ways to increase center’s profitability:
Increase the number of Jazz and Tap Dance performances;
Increase the share of Lower Orchestra Section tickets for all types of performances;
Revise the organization of Christmas Performances:
Increase the number of performances;
Find other location with more seats;
Increase tickets price on 10-20%.
As it can be seen from the analysis all types of performances reached its break even point, except Jazz performances. That is why I recommend to increase its number from 5 to 10. The 100$ of tickets for Lower Orchestra Section are sold for each performances. While Lower Orchestra Section tickets are sold on 60-90%. That is why I recommend to Increase the share of Lower Orchestra Section tickets. Christmas Performances are on highest demand and all types of tickets are sold on 100%. That is why I recommend to increase the number of performances and to find other location with more seats. Moreover, I recommend to increase tickets price as it obvious that Christmas performances are the most popular and people will be ready to pay a little bit more for the special event performance.
All these recommendations, together with the constant search for solutions to reduce costs, will make positive effects on the Annie Smith Dance Center’s activity.
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References
Break even analysis (2013). Business Owner's Toolkit. Retrieved from http://www.businessknowhow.com/money/breakeven.htm.
Drury, C. (2008). Management and Cost accounting 7th edition. South-Western Cengage learning.
Break-even analysis with multiple products. Cost Volume and Profit Relationships. Retrieved from http://www.accountingformanagement.org/break-even-analysis-with-multiple-products/
