UVA-C-2182

Rev. June 17, 2009

This case was prepared by Kristy Lilly (MBA 03) and Liz Smith (MBA 04) under the supervision of Professor
Mark Haskins. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling
of an administrative situation. Copyright 2003 by the University of Virginia Darden School Foundation,
Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com.
No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in
any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission
of the Darden School Foundation. Rev. 6/09.



THE CRADDOCK CUP


Jose Rivaldo shuffled through the papers on his desk and sighed. As the general manager
of the Craddock 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 years 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, CYSLs 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 cups profits and continue the tournament.


Background

The Craddock Cup was widely regarded as the premier tournament for high school soccer
players in the region. The tournament consisted of a boys high school bracket and a girls high
school bracket, each with 16 teams. Through a series of rounds and consolation rounds, the
rankings of all the teams, from 1 to 16, were determined, with each team playing four games
throughout the course of the tournament. See Exhibit 1 for the current years Boys High School
Division results and bracket structure.
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Funding for the tournament came from team registration fees, corporate sponsorships,
T-shirt sales, concession sales, and participation fees for soccer clinics held during the
tournament for the younger siblings of tournament participants. Each team paid a $295
registration fee to enter the tournament.

During the past few years, the Craddock Cup had evolved into a showcase event for
talented high school players. On average, about 25 college scouts attended the tournament each
year for recruiting purposes. The Craddock Cup encouraged recruiters attendance by paying for
their hotel rooms and by publishing a face book that included a photograph and profile of each
player 16 years of age or older. The presence of the scouts enabled the tournament to attract the
regions best high school teams.


Profit Statement Estimates

Rivaldo looked at the profit estimate for the next years Craddock Cup (Exhibit 2). He
planned to use this information as the basis for his recommendations to the CYSL board. He
used the following data in compiling the profit statement:

1. CYSL purchased tournament T-shirts for $6 a shirt, and sold them for $15 each.
Historically, the tournament sold 10 shirts per team.
2. The Craddock Cup expended the equivalent of $15 for food and beverages per player to
stock the concession stands. These concessions were sold at a 100% markup.
3. The tournament hosted two soccer clinics (one on each day of the tournament) for
younger siblings of tournament participants. The participation fee was $10 per child per
day; it cost CYSL $6 per child per day. The previous year, 216 children had participated
in the soccer clinics each day.
4. Corporate contributions averaged $14,000 a year. Despite Rivaldos best efforts, he had
been unable to secure additional corporate sponsorships for the tournament.
5. CYSL was required to pay $1,500 every year to register the Craddock Cup with the state
Youth Soccer League, and also had to pay a $4 insurance premium per player. On
average, each team fielded 18 players.
6. CYSL rented 10 soccer fields from the city for 40 weeks a year for a total fee of $48,000.
Although the Craddock Cup used the fields for only two days a year, Rivaldo allocated
one weeks rent to the Craddock Cup. In addition to the two days of tournament play,
CYSL spent two days preparing the fields for the tournament and two days cleaning up
after the tournament.
7. Each team played four games during the course of the tournament, and each soccer field
accommodated four games a day. Currently, the Craddock Cup required the use of eight
soccer fields. Additional fields could be rented from local schools at a cost of $150 per
day per field, while two goals for each additional field were rented at a cost of $60
a day.
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8. Two soccer balls were purchased for each field at a cost of $27 per ball.
9. Three referees were hired for each game at a cost of $100 a game ($25 each for two
linesmen and $50 for the head referee).
10. Trophies were provided for each player on the winning team in each bracket. On average,
each trophy cost $25.
11. The Craddock Cup defrayed approximately $80 a night in hotel costs for each college
scout attending the tournament. The scouts generally stayed for two nights.
12. Face books were published at a cost of $6 a book. The Craddock Cup published extra
face books and sent them to colleges that requested a face book but did not send a
representative to the tournament. The previous year, the tournament had published 75
face books.
13. Marketing and advertising costs had been $2,200 the previous year.
14. Currently, CYSL employed Rivaldo full-time at $42,000 a year and three part-time
workers at $12,000 a year each. Rivaldo worked on both the Craddock Cup and regular
CYSL operations. He spent approximately 15% of his time on the Craddock Cup. One of
the part-time employees, Renee Jansten, worked solely on the Craddock Cup, while the
other two part-time employees did not work on the Craddock Cup at all. Office rent and
utilities were allocated to the Craddock Cup based on the time Rivaldo spent working on
the Craddock Cup, as follows (Table 1).

Table 1. Craddock Youth Soccer League budget allocation.

CYSL Allocated to
Cost % Allocated Craddock Cup
Rivaldos salary $ 42,000 15% $ 6,300
Janstens salary 12,000 100% 12,000
Rent, utilities 18,000 15% 2,700
Total $ 72,000 $ 21,000

Rivaldo thought about the overhead expenses allocated to the Craddock Cup and
wondered whether the allocation was accurate or even whether overhead should be allocated to
the Craddock Cup at all. If the tournament were discontinued, CYSL would still incur field-
rental expenses for 40 weeks. Furthermore, CYSL would still have the same salary expenses for
Rivaldo and two of the other employees, though Janstens position would be eliminated. Rivaldo
wondered what the tournaments true operating profit really was, as a portion of the
tournaments costs was allocated from CYSL.

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The Future of the Craddock Cup

Looking at the profit data, Rivaldo thought about what changes, if any, could be made
before next years tournament to improve profitability and convince CYSLs board to continue
hosting the event. One easy way to raise additional revenue would be to increase the size of the
tournament by adding two middle-school brackets, one for boys and one for girls. This move
would increase the number of participating teams from 32 to 64. Because most of the high-
school teams had a corresponding middle-school team, Rivaldo thought he could easily double
the size of the tournament with little effort. Rivaldo knew the Craddock area had enough fields,
equipment, hotels, and referees to support a tournament with 64 teams. Above this number,
Rivaldo estimated that the costs for additional fields, rented goals, and referees would increase
significantly.

The CYSL board had also asked Rivaldo to determine the profit impact of increasing the
marketing and advertising expenses. The board was hoping that a big advertising push would
increase the visibility and prestige of the tournament. Rivaldo thought that by spending an
additional $1,000 on marketing and advertising, he might attract about 15 more college recruiters
to the tournament. This action would require CYSL to increase the number of published face
books to 95. Rivaldo thought that this strategy might allow CYSL to charge a higher registration
fee for the tournament.

In preparing for his meeting with the board, Rivaldo decided that he needed to review the
overhead-expense allocations and determine the impact of adding 32 teams to the Craddock Cup.
Finally, Rivaldo planned to calculate the financial impact of increasing the tournaments
advertising budget by $1,000 and to determine how much the registration fees for 64 teams
would have to be raised in order to fund this initiative.


Required

1. In determining whether to keep or drop the Craddock Cup, review the overhead-expense
allocations made from CYSL to the Craddock Cup to see if they should be revised or
eliminated.
2. Calculate the expected financial impact of adding 32 more teams to the tournament
schedule.
3. Calculate the break-even increase in registration fees per team for 64 teams given a
$1,000 increase in advertising expense, 15 more college recruiters, and 20 additional face
books.
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Exhibit 1
THE CRADDOCK CUP
This Years Boys High School Division Tournament Results
Team #1 Team #9
Team #1 Team #10
Team #2 Team #10
Team #4 Team #12
Team #3 Team #11
Team #4 Team #12
Team #4 Team #12
Team #4 v. Team #12
Team #5 Team #13
Team #6 Team #12 Team #13
Team #6 Team #14
Team #6 Team #16
Team #7 Team #15
Team #7 Team #16
Team #8 Team #16
Consolation - 3rd and 4th Place:
Team #6 v. Team #16
Team #6
Consolation - 5th and 6th Place:
Team #1 Team #10
Consolation 7th and 8th Place:
Team #1 v. Team #13 Team #7 v. Team #10
Team #1 Team #7
Team #7 Team #13
Consolation 9th and 10th Place:
Team #2 Team #9
Team #2 Team #9
Team #3 Team #11 Consolation 11th and 12th Place:
Team #2 v. Team #9 Team #5 v. Team #15
Team #5 Team #9 Team #14 Team #15
Team #5 Team #15
Team #8 Team #15
Consolation 13th and 14th Place:
Team #3 Team #11
Consolation 15th and 16th Place:
Team #8 v. Team #14 Team #3 v. Team #11
Team #8 Team #11
Team #8 Team #14
1st Team #12 9th Team #9
2nd Team #4 10th Team #2
3rd Team #6 11th Team #15
4th Team #16 12th Team #5
5th Team #1 13th Team #8
6th Team #13 14th Team #14
7th Team #7 15th Team #11
8th Team #10 16th Team #3
Final Results

Source: Created by case writer.
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Exhibit 2
THE CRADDOCK CUP
Profit Statement







































Source: Created by case writer.
Current
Size
Registration fees 9,440 $
T-shirts 4,800
Concessions 17,280
Soccer clinic 4,320
Contributions 14,000
Total revenue 49,840 $
T-shirts 1,920
Concessions 8,640
Soccer clinic 2,592
Player insurance 2,304
Registration with state YSL 1,500
City field rental 1,200
Soccer balls 432
Referees 6,400
Trophies 900
Hotels 4,000
Face books 450
Marketing and advertising 2,200
CYSL salaries 18,300
CYSL rent 2,700
Total expenses 53,538 $
Profit (loss) (3,698) $
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