The Craddock Cup
6 Pages Posted: 10 Jun 2009
This case has three main purposes: (1) to illustrate the importance of understanding cost behaviors in calculating the contribution of the Craddock Cup youth soccer tournament to decide whether to continue, drop, or expand the tournament; (2) to provide a vehicle for discussing sunk costs, overhead allocation methods, and the impact of misallocation on the income/loss shown for a segment of an organization; (3) to allow students to perform simple break-even analysis using relevant costs.
Rev. June 17, 2009
THE CRADDOCK CUP
Jose Rivaldo shuffled through the papers on his desk and sighed. As the general manager of the Youth Soccer League (CYSL), Rivaldo was committed to providing high-quality soccer activities to boys and girls in the area. In addition to managing regular CYSL operations, Rivaldo was heavily involved in putting on a regional soccer tournament, the Craddock Cup, which brought approximately 32 premier high school soccer teams from throughout the region each May.
This year's tournament, like its predecessors, had been considered a great success by players, their families, and the local community. The weather had been beautiful, the referees had been fair, and the local hotels and restaurants had profited from the influx of people. Nevertheless, Rivaldo knew that the Craddock Cup was in trouble. Tournament expenses continued to rise, while corporate sponsorships remained difficult to obtain. CYSL had founded the Craddock Cup, in part, to fund a field-acquisition program for the league, with the expectation that the tournament would generate at least $ 6,000 annually toward that goal. Unfortunately, with tournament profits averaging a loss of almost $ 4,000 a year, CYSL's board of directors was beginning to express frustration with the lack of profits generated by the Craddock Cup. Rivaldo knew the Craddock Cup was in danger of being canceled, and that he risked losing his job with CYSL if he did not devise a plan to increase tournament profits. He decided to review the organization and expenses of the Craddock Cup to see if there was a way to increase the cup's profits and continue the tournament.
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Keywords: break even analysis contribution analysis cost accounting cost behavior relevant costs
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The Craddock Cup
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