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)

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) 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  Assess 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 ratios  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  Overhead = _________________ x _________________  GST  GST is not charged on recreational programs for children 14 and under.  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 = ________________ x ________________

15. Sponsorship  Types of sponsorship:  Financial Sponsor – money  In-Kind Sponsor – goods  Location Sponsor – facility  Sponsorship should be included as a form of revenue.  Any corresponding expenses should be included in the expense portion of your cost model

16. 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 = _____________ / ______________

17. 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?

18.  Minimum registrants: 16  Camp runs 8:00am-4:00pm, Mon – Fri  Staff: 2 staff – Paid $15/hr (+ 4% in benefits)  Equipment Costs - $300  Participant T-shirt - $17/participant  Other giveaways - $12/participant  Camp Marketing - $1250  Registration charge - $5.25/participant  Overhead – 10% ($448)  Profit Target – 15%

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.