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Abstract

This case follows Shank, and Govindarajan (1988)in developing a scenario which provides opportunities for both “relevant cost” and “strategic” analyses. The case focuses on the use of relevant costs in a practical decision-making framework. It requires a distinction between fixed, variable, sunk and discretionary costs and a facility with break-even analysis. Further, it highlights the importance of economic and marketing reality to cost-based decisions.

Cambridge Business Conferences (CBC) is a West Australian based company skilled in the organisation and running of conferences and seminars. The company normally runs six or seven such events per year and is currently planning a two-day conference to take place at the Metro Hotel, South Perth, in August 1998. The Conference will be titled “Information Technology in the 21st Century” and will present twelve speakers of international reputation, five from WA, three from the Eastern States of Australia and two each from UK and US. The booking of the venue has incurred the payment of a non-refundable deposit of $2,000.

Conference organiser, Helen Wiggins, estimates the following costs and revenues to be applicable:

1. Costs

(a) A daily delegate rate of $30 per head on each day of the Conference, to cover tea\coffee and use of all hotel facilities.

(b) Meals charged at a standard rate—breakfast $12, lunch $18, dinner $28.

(c) Overnight rate for a double room of $49.50.

(d) Stationery and Conference papers costing $10 per delegate pack.

(e) Conference speakers are to be paid a combination of fee plus expenses, and will be offered meals and overnight accommodation at the company's expense.The following fees have been agreed, expressed in the home currencies of the presenters, and must be paid even in the event of the prior cancellation of the Conference:3 @ $500; 2 @ $600; 2 @ $1,000; 1 @ £800; 1 @ US$800The remaining speakers have either offered their services free or are prevented from charging a fee...