A school plans a fundraising event for which it has a sponsor, and an equipment supplier for benches, tables and chairs. The sponsor agrees to pay an amount equal to 20% of the proceeds obtained, and the school agrees to pay the supplier 10% of the proceeds.
Does it matter whether the equipment supplier is paid before the sponsorship money is obtained – or vice versa?
A school plans a fundraising event, for which it has a sponsor and an equipment supplier (benches, tables etc). The sponsor agrees to pay an amount equal to 20% of the proceeds obtained, and the school agrees to pay the supplier 10% of the proceeds.
Does it matter whether the equipment supplier is paid before the sponsorship money is obtained – or vice versa?
Approach to solution
Suppose that the total takings are $1000.
(a) Pay supplier first
Amount to school after costs = $1000 x (90/100) = $900
Final amount to school = $900 x (120/100) = $1080
(b) Obtain sponsors money first
Amount to school after sponsor = $1000 x (120/100) = $1200
Final amount to school = $1200 x (90/100) = $1080
Solution and interpretation
From the school’s point of view – No ($1080 both ways).
From the viewpoint of the supplier and the sponsor – Yes.
(a) Supplier gets $100 and Sponsor pays $180
(b) Supplier gets $120 and Sponsor pays $200.
In (b) the sponsor has subsidised the supplier as well as sponsoring the school.
General insights
- The best solution to a problem may depend on the perspective of different persons involved: school? supplier? sponsor? all three?
- Key terms need to be defined clearly up front – are “proceeds” to be determined before or after subtracting costs?
- Is sponsorship to be applied to gross or net profit?
- Team approaches can ensure that the interests of all players are considered.
