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When planning a new event all expenses must be taken into account. Budget must be planed after agreement with the suppliers about costs. When full cost estimation is ready, it is possible to calculate the amount of the necessary revenue and to attract supporters and sponsors of the event.
There are two types of expenses - fixed and variable, producing together the overhead expenses. Variable expenses depend on the number of sold products – in our case – the sold tickets. Fixed expenses include administration costs of a company during event – personnel salaries, all daily costs, taxes, insurance. In our case the company calculated 2 days expenses, as the event lasted for 2 days. Fixed expenses do not depend on the number ov visitors; expenses of event content production are fixed.
A. Fixed expenses
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Administration costs of the company 2 days |
LVL 200 |
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Event insurance |
LVL 100 |
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Rent of extra land for placement of tents and car parking rented from a neighbour |
LVL 200 |
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Rent of stages equipment and tents for musicians |
LVL 1,000 |
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Tables, chairs and sheds for the fair, delivered by Cēsu Municipality |
LVL 0 |
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Light and sound equipment |
LVL 600 |
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Portable toilets |
LVL 300 |
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Security services |
LVL 650 |
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Set-up and take-down of the territory |
LVL 200 |
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Cleaning of the territory after the event |
LVL 150 |
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Decoration of the territory and information signage |
LVL 400 |
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Fixing up the fireplace |
LVL 150 |
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Materials for the fireworks |
LVL 500 |
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Equipment for catering places delivered by caterers |
LVL 0 |
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Fees for music bands |
LVL 2,200 |
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Event host fee |
LVL 350 |
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Copyright fees for public playback of the music |
LVL 80 |
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Permit for trading alcohol and food in an outing |
LVL 80 |
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Costs of advertisement (printing work included) |
LVL 2,300 |
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Advertising - barter deal with publishing house Diena* |
LVL 500 |
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Advertising – barter deal with printing house Veiters* |
LVL 200 |
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Transporting costs for supply of materials |
LVL 300 |
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TOTAL – FIXED EXPENSES |
LVL 10,460 |
B. Variable expenses
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1.Payment for advance booking of tickets – 7% of the ticket price: Ls 0.20 from Ls 3.00 per ticket, 1500 tickets |
LVL 300 |
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TOTAL EXPENSES OF THE EVENT |
LVL 10,760 |
VAT of 21% is included in the prices.
*Barter is a method of exchange by which goods or services are directly exchanged between two companies for other goods or services without using money. The cost of the exchanged goods or services must be included in the expense sheet.
Entrepeneur must fix the so called break-even point, wich depends on number of the sold units (tickets), selling price per unit (ticket), as well as the composition of the fixed and variable costs.
In break-even point the income is similiar to expenses. One must consider this fact when calculating the ticket price. One can read the theory of calculations in “Marketing Culture and Arts” (Montreal, 2001, p.133).
To calculate the break-even point and understand what is the number of the sold tickets you need to avoid financial loss, the following formula can be used:
Break-even point =
Fixed costs 10,460
__________ = ________________ = 3735 visitors
Gross profit 3.00 - 0.20
Gross profit is ticket price minus variable costs per ticket.
By calculating 3 Lats per ticket as affordable ticket price, producers did not want to rise the price; however, it is unrealistic to serve 3735 visitors in “Rakši”. Therefore the entrepreneur attracted the supporter or sponsor – regional municipality of Amata, whose financial support of 5000 Lats made the break-even point possible with 1950 visitors, bying tickets in advance via the Internet.
10,460 - 5000 = 5460 : 2.80 = 1950 visitors
It was also counted that tickets will be sold before the event in “Rakši” without intermediary and there were another items of income planned:
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1.Financial support of municipality of Amata Region |
Ls 5 000 |
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2.Ticket income (1500 x 3.00) + (1500 x 2.80) |
Ls 8 700 |
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3.Income from accommodation |
Ls 1 260 |
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4.Income from tent places 300 x 5.00 |
Ls 1 500 |
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5.Income from the rent of catering spaces 3 x 150.00 |
Ls 450 |
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TOTALLY PLANNED REVENUES |
Ls 16 910 |
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ENTREPRENEUR HAS PLANNED TO EARN 16,910 - 10,760 = |
Ls 6 150 |
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