1. PERL 105 Practicum: Cost Model Seminar

2. Objectives  Understand the purpose of using a cost model  Gain an understanding of how to use a cost model  Recognize the benefits to using a cost model  Understand the purpose of conducting a market analysis.

3. Cost Model  A tool that can be used to clearly define the expenses associated with running a program

4. Program Session/YearFall 2012 Program NameHockey LeagueMinMax # of participants 1530 REVENUECost/Team Members$1,000.00 15000.0030000.00 Non Members$1,300.00 19500.00$39,000.00 TOTAL REVENUE (Members) $15,000.00$30,000.00 EXPENDITURES Staffingper hour# of hours/day# of days Staff 125.004.0010.001000.00 Staff 2 0.00 Total Wages 1000.00 Benefits20% 200.00 TOTAL WAGES & BENEFITS $1,200.00 FIXED PROGRAM EXPENDITURESCost/Participant Instruction materials/participant 0.00 Give Aways/participant 0.00 Clothing/participant 0.00 Facility Rental150.00 6000.00 Registration cost/participant5.25 78.75157.50 Marketing cost - 25% program fee25.00% 325.00 Overhead (15% Contribution)15.00% 2250.004500.00 GST 750.001500.00 Total Other Expenditures $9,403.75$12,482.50 TOTAL EXPENDITURES $10,603.75$13,682.50 Profit $4,396.25$16,317.50 Profit Target (minimum 30%) 29%54%

5. Expenditures “The costs or expenses incurred by an organization. …expenditure is usually incurred by an outlay of money…” - Law, Jonathan (2010), A Dictionary of Accounting

6. Revenue “Any form of income.” - Law, Jonathan (2010), A Dictionary of Accounting

7. Profit “For a single transaction or set of transactions, the excess of sales revenue over the costs of providing the goods or services sold.” - Law, Jonathan (2010), A Dictionary of Accounting - ie. Revenue – Expenses = Profit

8. Benefits of Cost Models  Gain an understanding of the overall costs of a program  Assists with budget management  Can be used to determine appropriate registration fees and minimum participant requirements  Assesses revenue

9. Market Analysis  After cost model is completed, do a market analysis to see where your program fits in relation to other similar facilities offering similar programs.  If it is too cheap people will question it’s quality.  If it is too expensive, people will go elsewhere (unless your program is extraordinary and justifies higher price).  If this is the case, make sure that your advertising clearly explains why your product is better.

10. How to Use a Cost Model…

11. Expenses  Staffing  Benefits  Vacation pay  Consider supervision rations  Facility Rental  Equipment  Giveaways, Prizes, Perks  Set-Up Costs  Set-up facility or equipment

12.  Transportation and Travel  Contract Services  Are you contracting a portion of the program out to another organization?  Overhead  Administration  Building Costs  Generally expressed as a percentage of revenue  GST  Difference between expenses that are participant dependent and those that aren’t

13. Total Expenses The sum of all individual expenses

14. Revenue  Registration cost per participant  Number of participants  Maximum number based on facility space, supervision ratios, equipment, etc…  Minimum number based on the least number of participants needed to run program and still meet profit target.  Total Revenue: number of registrants x registration fee

15. Profit Target  The amount of profit you want or need to make.  Usually set by company management.  Expressed as a percentage of revenue.  Profit Target = Profit/Revenue

16. Cost Model Assignment Use the information on the next slide to answer the following questions. 1. What is the registration fee/participant 2. The profit represents what percentage of the revenue? Did you meet the profit target?

17.  Minimum registrants: 18  Camp runs 8:00am-4:00pm, Mon – Fri  Staff: 2 staff – Paid $14/hr (+ 4% in benefits)  Equipment Costs - $400  Participant T-shirt - $15/participant  Other giveaways - $10/participant  Camp Marketing - $1000  Registration charge - $5.25/participant  Overhead – 10% ($450)  Profit Target – 20%

18. Program Session/Year Program Name Min # of participants 18 REVENUECost/Registrant Youth 250.00 TOTAL REVENUE (Members) $4,500.00 EXPENDITURES Staffingper hour# of hours/day# of days Staff 114.008.005.00560.00 Staff 214.008.005.00560.00 Total Wages 1120.00 Benefits4% 44.80 TOTAL WAGES & BENEFITS $1,164.80 Other ExpendituresCost/Participant Equipment 400.00 T-shirts$15/Participant270.00 Other Giveaways$10/Participant180.00 Marketing 1000.00 Registration Charge$5.25/Participant94.50 Overhead10%450.00 Total Other Expenditures $2,394.50 TOTAL EXPENDITURES $3,559.30 Profit $940.70 Profit Target (minimum 20%) 21%

19. References  Owen, Gary. Ed. Jonathan Law. A Dictionary of Accounting. 4th ed. New York: Oxford UP, 2010. Oxford Reference Online Premium. Web. 7 Sept. 2012.