LYCEUM-NORTHWESTERN UNIVERSITY

Dagupan City, Pangasinan

COLLEGE TOURISM MANAGEMENT

Study Guide 14
Management

Introduction
Quality Management is a function not solely of the efficiency with which
it utilizes organizational resources but also of the creativity and innovativeness
of such management in adapting the organization to its environment.
Events management is an application of various disciplines. This lesson
revisits the foundations needed by event managers-particularly the basics of
management and accounting.

Learning Objectives
After this lesson, the learner is expected to:
1. Identify management functions
2. Explain why accounting skills are needed by event managers
3. Perform break-even point analysis

Management
The dictionary defines as the efficient use of resources to achieve
objectives. Resources include man, money, and machines. The process
approach to management authored by Koontz and O’Donnel outlines the
interlocking management functions as planning, organizing, directing, and
controlling.

1. Organizing – the process of identifying and grouping activities into

sensible structures, which includes outlining the vision, mission, and
organizational objectives as well as determining specific tasks needed to
stage an event and allocating each task to a person or a group of
persons.
2. Planning – creating an event concept and laying out detailed steps with
which to execute the event concept
3. Directing – the process of communicating with an influencing people to
attain targets
4. Controlling – performance monitoring and making adjustments or
corrections to make sure that plans are properly executed and objectives
are achieved
5. Staffing – manpower is an important resource, especially in the service
industry as discussed earlier in the first three units of this book.
 Accounting
The dictionary defines accounting as the systematic recording, analysis,
and reporting of financial transactions, an event manager needs basic
accounting skills. However, event managers do not need to immerse
themselves into the whole banana of the equation: assets=liabilities +
equity. The accounting elements most crucial in events management are the
cost, the revenue, cash flow, break-even point, and the bottom line or the
profit/loss.

Cost – refers to the expenses or how much it will take to stage the event
Revenue – refers to how much the event earns in gross receipts. Revenue
sources for an event may include ticket sales, ad space in souvenir program,
exhibit space, product presentation, sponsorship, etc.
Cash Flow – is the schedule of cash inflow and outflow that details when
receivables will be available to cover cash requirements or meet payment
deadlines of suppliers.
Break-even Point – is the minimum point where revenue meets cost. This is
the minimum number of tickets that has to be sold to meet cost, should all
other revenue sources fail.
Bottom Line – is equal to the difference between cost and revenue.

Sample Financial Report (For Terminal Report)

Estimate Actual
A. Revenue:
Ticket Sales 400x50.00 20,000.00 18,000.00
Sponsorships 5, 000.00 10,000.00
__________ __________
Total 25,000.00 28,000.00

B. Expenses:
Prizes 6,000.00 6,000.00
Reception (food and beverage) 4,000.00 3,800.00
Stage Décor 3,000.00 2,789.00
Tokens for judges 2,000.00 2,200.00
Communications expense 1,000.00 1,111.00
Certificates 1,000.00 1,000.00
Printing 2,000.00 2,100.00
Tarpaulin 2,500.00 2,500.00
Miscellaneous 500.00 500.00
__________ _________
Total 22,000.00 22,000.00

C. Profit 3,000.00 6,000.00

Note: Always attach receipts for validation and evidences.
Break-even Point Analysis
In preparing the break-even point analysis, the following must be
determined: (1) available space for sale, (2) selling price, (3) projected gross
revenue, (4) fixed and variable costs, and (5) net income (profit/loss).
Below is an illustration of the break-even point analysis for an exhibition:

Fixed Cost: ₱ 3,000,000.00

Variable Cost: ₱ 500 x 316 sq.m. 158,000.00
_______________
Total Cost: ₱ 3,158,000.00
Revenue: ₱ 10,000.00 per sq.m x 316 ₱ 3,160.000.00
_______________
Profit: (+) ₱ 2,000.00

Legend:
1. The ₱ 3-M fixed cost represents the cost rental, printing, advertisement,
and other expenses which will cost the same no matter how many
exhibitors join and pay for an exhibition space. Refer to the budget for
the fixed cost breakdown.

2. The variable cost represents the booth rental fee paid by the organizer to
the booth contractor. This amount (₱ 500.00) is multiplied by the
number of booth panels used which depends on the number of confirmed
paying exhibitors. The cost of booth panels for non-paying exhibitors be
included in the fixed cost.

3. The ₱ 10,000.00 per square meter revenue represents the selling price.
This means that one square meter is sold to the exhibitor at ₱ 10,000.00.
If a booth is four square meters wide, the price of each booth space is ₱
40,000.00 for the use of the exhibitor for the whole duration of the event.

 Profit is equal to the difference between revenue and total cost. Break-
even is achieved when profit is equal to zero. The computation above
shows that selling the booth space at ₱ 10,000.00 per square meter gives
the organizer a minimal profit of ₱ 2,000.00 if it sells at least 316 sq.m.
divided by 4 sq.m. per booth equals 79 booths.

Suppose the total area available for exhibitors is 600 sq.m. If the organizer
is able to sell all 600 sq.m. of exhibit space, the organizer will gain a profit of ₱
2,700,000.00, as shown below
 Fixed Cost: ₱ 3,000,000.00
Variable Cost: ₱ 500 x 600 sq.m. 300,000.00
_______________
Total Cost: ₱ 3,300,000.00
Revenue: ₱ 10,000.00 per sq.m x 316 ₱ 6,000,000.00
_______________
Profit: (+) ₱ 2,700,000.00

However, if the organizer sell just ine 4 sq.m. booth space less than 79,
this will already produce a loss of ₱ 36,000.00, as shown below:

Fixed Cost: ₱ 3,000,000.00

Variable Cost: ₱ 500 x 600 sq.m. 156,000.00
_______________
Total Cost: ₱ 3,156,000.00
Revenue: ₱ 10,000.00 per sq.m x 316 ₱ 3,120,000.00
_______________
Profit/Loss: (-) ₱ 36,000.00

While the definition states that break-even is achieved when revenue

minus cost is zero, getting an absolute zero is rare. Organizers often get either
a positive or negative bottom line. In this example, break-even is achieved upon
selling 79 booths at 4 sq.m. per booth, which is equivalent to 316 sq.m. sold at
₱ 10,000.00. If the total area available for exhibitors is 600 sq.m., break-even is
achieved upon selling 52.66% of the total available space.

Knowing the break-even point for an event gives the organizer key
information for decision making. The organizer can then make several analysis
as to whether decreasing the selling price of booth spaces can make it more
saleable and therefore, produce more profit or otherwise. It will also identify the
target number of exhibitors who should commit to participate in order to
generate profit.