Business Conferences Plc Project Assessment

Introduction

The purpose of this report is to evaluate the viability of the new conference by Business Conferences Plc. This has been accomplished by the use of CVP, Break-even, and Financial Analysis. I hope that after reading this report, you can make a more informed decision on whether or not to approve of this project. In case of any further questions regarding this matter, please do not hesitate to contact me.

Viability of the Conference

The viability of this conference depends on the number of delegates who attend and the attendance fees they pay. The budget below represents the expected costs and revenues assuming the best-case scenario prevails. In this situation, the estimated costs would not change, the maximum number of delegates would attend and the maximum fee would be charged. This is an idealistic budget.

BUDGET
Fixed Costs £
Non Refundable Fee 2000
Advertisement 1000
Marketing Set-up 500
Printing Brochures 750
Mailing brochures 2500
Administrative Costs 5000
Speakers’ Fees 800
Speakers’ Refreshments 180
Speakers’ Breakfast 72
Speakers’ Lunch 180
Speakers’ Dinner 135
Speakers’ Overnight Stay 1080
Speakers’ Stationery 90
UK speakers Travel 200
EU speakers Travel 1303.5
Australian Speakers Travel 2496
TOTAL FIXED COSTS 18286.5
Variable Costs £
Refreshments 20
Breakfast 8
Lunch 20
Dinner 15
Overnight Stay 120
Stationery 10
TOTAL VARIABLE COSTS 193
Price per delegate £700
Expected Number of Delegates 200

Assuming that this budget holds, the following table shows the Break-even Analysis that would prevail.

BREAK-EVEN ANALYSIS
Terms
Fixed Cost=F
Variable cost=V
Selling Price=P
Number of Delegates=x
Contribution=C
Break-Even Number = F/(P-V)
18286.5/(700-193)
36
Break-Even Sales= F/(C/P)
18286.5/(507/700)
25248
Margin of Safety Expected Sales-break Even Sales
(700*200)-25248
114752

Interpretation

Business Conferences Plc expects to incur fixed costs of £ 18287. This amount is independent of the number of delegates that will attend the conference. Aside from this, £ 193 will be incurred for each delegate that attends the conference. Considering these costs and revenues, the company’s costs will equal their revenues if 36 delegates attend. Any number below 36 delegates will result in a loss. Any number above 36 delegates will constitute a profit for the company. The break-even sales are £25248. The contribution per delegate is £507. The margin of safety indicates how far above or below the break-even point the company is operating. The current level of activity is taken to be the maximum of 200 delegates. The margin of safety is thus £114752. This means that the company is operating way above the break-even point.

The tables above represent an ideal situation that may not materialize. The costs above may change due to inflation. Changes in foreign exchange prices may also raise or lower costs. There is a possibility that less than 200 delegates will attend the conference. These changes are factored into the table below. It shows different scenarios that may prevail. This is more realistic than the previously presented tables.

EFFECT OF CHANGING PRICES AND DELEGATES ATTENDING
Number of Delegates Price Cost Revenue Profit
50 500 27937 25000 -2937
100 500 37587 50000 12413
150 500 47237 75000 27763
50 400 27937 20000 -7937
100 400 37587 40000 2413
150 400 47237 60000 12763
50 300 27937 15000 -12937
100 300 37587 30000 -7587
150 300 47237 45000 -2237

Business Conferences Plc cannot afford to charge a conference fee of £300. Such a fee would result in losses, regardless of the number of delegates who attend. The company can lower their fees to £400 or £500 provided they can attract more than 50 delegates. Lowering the fees raises the break-even point. Thus, charging lower fees and having less than 50 delegates would also result in a loss.

Recommendation

Business Conferences Plc should proceed with the project if there is certainty regarding the conference attendance and fees. The project holds a lot of profit potential. However, the company should avoid charging very low conference fees as this will result in a loss. The conference fees can be lowered slightly to attract customers as this is a new product.

Relevant and Irrelevant Costs

There are two categories of costs involved in making this decision. Relevant costs should be taken into consideration while irrelevant costs should be ignored. Irrelevant costs will be incurred whether or not the project proceeds. In this case, the non-refundable fee of £200 that has been paid to secure accommodation is an irrelevant cost. It has already been incurred and is thus a sunk cost. All the other costs can be avoided by deciding not to undertake the project. These costs should be carefully scrutinized and any unnecessary or avoidable expenses cut down.

Company Goals

The company may have long or short-term goals. In the short term, they may wish to maximize the early profits in this sector before competitors enter the market. This is a new product and the company may be employing price skimming. This would explain the high conference fees of £700 per delegate. The company could seek to lower costs by negotiating lower fees with the speakers and the venue owners. This would also aid in the reduction of costs and thus raise the expected profits.

Long-term goals could include the creation of a brand name in this sector and gaining a huge market share. This could be achieved by increasing the amount budgeted for advertising. Customer feedback should be sought during the conference. This will enable the company to determine whether customer needs are being satisfied. Market surveys would also aid in measuring the growth of Business Conference Plc’s market share. The company should not ignore the potential of competitors to erode their brand name.

Assumptions

Two foreign exchange rates have been used in the preparation of this report. One Australian Dollar has been equated to £0.624 while one Euro has been equated to £0.8693. These were used in computing the travel expenses for the speakers. The fixed costs, variable costs, and unit selling prices have also been held constant in performing the break-even analysis.

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BusinessEssay. 2022. "Business Conferences Plc Project Assessment." October 20, 2022. https://business-essay.com/business-conferences-plc-project-assessment/.

1. BusinessEssay. "Business Conferences Plc Project Assessment." October 20, 2022. https://business-essay.com/business-conferences-plc-project-assessment/.


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