adms1000 Lecture Notes - Lecture 5: Transaction Cost, Marginal Revenue, Gift Card
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ANALYSIS AND RESEARCH CASE: ACCOUNTING INFORMATION AND SALARYNEGOTIATIONS
Hamilton Hawks Playersâ Association and Mr. Sideline, the CEOand majority owner of Hamilton Hawks Soccer, Inc, ask your help inresolving a salary dispute. Mr. Sideline presents the followingincome statement to the playersâ representatives.
HAMILTON HAWKS SOCCER, INC. | ||
Ticket revenues | $ 3,500,000 | |
Stadium rent expense | $2,500,000 | |
Ticket expense | 30,000 | |
Promotion expense | 80,000 | |
Player salaries | 700,000 | |
Staff salaries and miscellaneous | â265,000 | 3,575,000 |
âNet income (loss) | $ (75,000) | |
The players contend that their salaries are below market and araise is warranted. Mr. Sideline argues that the Hamilton Hawksreally lose money and, until ticket revenues increase, a salaryhike is out of the question.
As a result of your inquiry, you discover that Hamilton HawksSoccer Company owns 85 percent of the voting stock in HawksStadium, Inc. This venue is specifically designed for soccer and iswhere the Hawks play their entire home game schedule. However, Mr.Sideline does not wish to consider the profits of Hawks Stadium inthe negotiations with the players. He claims that âthe stadium isreally a separate business entity that was purchased separatelyfrom the team and therefore does not concern the players. On top ofthat, we allocate all the ticket revenues to the teamâs incomestatement."
The Hawks Stadium income statement appears as follows:
HAWKS STADIUM, INC. | ||
Stadium rent revenue | $2,500,000 | |
Concession revenue | 875,000 | |
Parking revenue | 95,000 | $3,470,000 |
Cost of goods sold | 270,000 | |
Depreciation expense | 90,000 | |
Grounds maintenance expense | 410,000 | |
Staff salaries and miscellaneous | 200,000 | â 970,000 |
âNet income (loss) | $2,500,000 |
Required
What advice would youprovide the negotiating parties regarding the issue of consideringthe Hawks Stadium income statement in their discussions? Whatauthoritative literature could you cite in supporting youradvice?
What other pertinentinformation would you need to provide a specific recommendationregarding playersâ salaries?