1. Planning by the Groningen Arts Centre
M987Z234: Phi Thi Loan
M987Z247: Nguyen Mac To My

2. 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

3. Assignments Assignment 1: Contracts
Assignment 2: Randy Newman at Groningen
Assignment 3: Latvian Company
Assignment 4: Disappointing results

4. 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

5. 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

6. By the comedian Bram de Jong (Variable-fee contract)
Case 1
( based on last year)
Case 2
(based on last year)
Case 3
(based on latest season)
# of seats
(unit: seat)
Best seats:
60%*700 seats=420
Worst seats:
40%*700 seats=280
Best seats: 500
Worst seats: 200
500
25%*200=50
Price
Best seats: €17.50
Worst seats: €15
Revenue
420 seats*€17.50
=€7,350
280 seats*€15=€4,200
Total: €11,550
500 seats*€17.50
=€8,750
200 seats* €15=€3,000
Total: €11,750
Worst seats:€
50 seats*€15=€750
Total: €9,500
GAC get
Comedian
25%*€11,500=€2,887.50
75%*€11,500=€8,662.50
25%*€11,750=€2,937.50
75%*€11,750=€8,812.50
25%*€9,500=€2,375
75%*€9,500=€7,125

7. By the actress Bridget Masland (Fixed-fee contract)
Case 1
(based on last year)
Case 2
Case 3
(based on latest season)
# of seats
(unit: seat)
Best seats:
60%*700 seats=420
Worst seats:
40%*700 seats=280
If 500 seats all are the best seats:
500
If not, then:
60%*500 seats=300
40%*500 seats=200
Price
Best seats: €15
Worst seats: €10
Best seats: €17.50
Worst seats: €15
Revenue
420 seats*€15
=€6,300
280 seats*€10=€2,800
Total: €9,100
500 seats*€17.50
=€8,750
Total: €8,750
300 seats*€17.50
=€5,250
200 seats*€15=€3,000
Total: €8,250
Cost
€6,500
GAC get
Actress
€9,100-6,500=€2,600
€8,750-6,500=€2,250
€8,250-6,500=€1,750

8. By the band Double Dutch (Variable-fixed-fee contract)
Case 1 (based on last year)
Case 2 (based on latest season)
# of seats
(unit: seat)
Best seats: 1,200
Best seats: 1,000
Worst seats: 200
Price
Best seats: €17.5
Best seats: €17.50
Worst seats: €6.50
Revenue
Best seats:
1,200 seats*€17.5
=€21,000
Total: €21,000
1,000 seats*€17.50=€17,500
Worst seats:
200 seats*€6.50=€1,300
Total: €18,800
Cost
Double Dutch gets: €12,500
Surplus (from 801th to 1,200th ticket):
400 seats*50%*€17.50=€3,500
Surplus (from 801th to 1,000th ticket):
200 seats*50%*€17.50=€1,750
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, =€3,400

9. 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:
Randy receives 50% of the box-office receipts & GAC receives the remaining 50%
GAC pays a fixed amount to Randy if it were the highest bidder & its bid was therefore accepted
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

10. 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)

11. 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

12. Term a: The GAC will get more profit in this case
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.

13. A financial analysis of each contract
Variable-fee contract
Fixed-fee contract
# of seats
(unit: seat)
Best seats: 60%*1,200 seats=720
Worst seats: 40%*1,200 seats=480
Price
Best seats: €18.75
Worst seats: €17.50
Sales
Best seats:
720 seats*€18.75=€13,500
Worst seats:
480 seats*€17.50=€8,400
Total: €21,900
Cost
50%*€13,500=€6,750
50%*€8,400=€4,200
Total: €10,950
From €6,500
to €12,500
GAC get
€21,900-10,950=€10,950
From €21,900-12,500= €9,400
to €21,900-6,500= €15,400

14. 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

15. 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.

16. 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.

17. type
estimated price
estimated number of visitors
actual price
actual number of visitors
cabaret
15.0
470.0
15.0 *
390.0
18.0
700.0
675.0
16.0
620.0
400.0
14.0
510.0
590.0
theatre
9.0
580.0
560.0
10.0
540.0
650.0
13.0
500.0
350.0
450.0
570.0
opera
30.0
480.0
30.0 **
520.0
26.0
congress
20.0
550.0
430.0
anniversary
600.0
525.0
* 20% of the tickets were sold at a discount of 25% ** Half of the tickets sold were at a discount of 10%

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

19. price variance (revenue) quantity variance (revenue)
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)
cabaret
(1,492.5)
(292.5)
unfavorable
(1,200)
(450.0) -
favorable
(450)
(3,520.0)
(3,520)
1,120.0
1,120
total cabaret
(4,342.5)
(4,050)
theatre
(180.0)
(180)
1,100.0
1,100
(1,950.0)
(1,950)
1,200.0
1,200
total theatre
170.0
0.00
170
opera
420.0
(780.0)
2,860.0
2,860
total opera
3,280.0
4,060
congress
(2,400.0)
(2,400)
anniversary
(2,250.0)
(2,250)

20. type
Contractual cost
Fixed cost
extra cost types
Type of contract
Staff cost
Catering cost
cabaret
lump sum
6000
600 -
price ppv 16
mix
ppv
theatre
 lump sum
4500
Price ppv 8 10
ppv
opera
Lump sum
12000
 price ppv 23
congress
8,000
15 per possible visitor
anniversary
15,000
20 per possible visitor

21. cost variance (from quantity)
Lump sum: cost was unchanged for estimated and actual Price ppv = contractual cost * number of visitors Mix = lump sum + (price ppv * number of visitors)
type
contractual cost
estimated cost
actual cost
cost variance (from quantity)
cabaret
6,000 -
11,200
10,800
(400)
8,720
7,400
(1,320)
total cabaret
31,920
30,200
(1,720)
theatre
4,500
4,320
5,200
880
5,000
3,500
(1,500)
3,700
4,420
720
total theatre
17,520
17,620
100
opera
12,000
10,350
12,880
2,530
total opera
22,350
24,880

22. type
Contractual cost
Fixed cost
extra cost types
Type of contract
Staff cost
Catering cost
cabaret
lump sum
6000
600 -
price ppv 16
mix
ppv
theatre
 lump sum
4500
Price ppv 8 10
ppv
opera
Lump sum
12000
 price ppv 23
congress
8,000
15 per possible visitor
anniversary
15,000
20 per possible visitor

23. Estimated extra cost = staff cost + (catering cost
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
type
extra cost
estimated extra cost
actual cost
extra cost variance
congress
16,250
14,450
(1,800)
favorable
anniversary
24,000
25,500
1,500
unfavorable
Total
40,250.0
39,950.0
(300.0)

24. cost variance (from quantity)
type
estimated revenue
actual revenue
revenue variance
price variance (revenue)
quantity variance (revenue)
TOTAL
113,430.0
107,887.5
(5,542.5)
(1,072.5)
(4,470.0)
type
contractual cost
fixed cost
extra cost
estimated cost
actual cost
cost variance (from quantity)
estimated extra cost
extra cost variance
TOTAL
71,790.0
72,700.0
910.0
7,200.0
40,250.0
39,950.0
(300.0)

25. 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.