Scienceview National Planetarium (Scienceview) is a recently established not-for-profit organization in Birmingham, Ontario and its focus is on science-based entertainment and education. In two months, Scienceview will be holding a grand opening for its planetarium.
The organization’s mandate is to raise the profile of science and technology through an Interactive environment and education for the general public. Its initiatives include:
• Supporting science programs at local schools to increase the interest of primary aged children in science.
• Promoting lifelong learning among seniors.
• Allowing the local university to use Scienceview as a science resource centre to address declining enrolment in science programs.
• Allowing scientists to use the telescope for a variety of research projects and share their studies in a monthly lecture series.
• Hosting special guest speakers including famous astronauts.
Scienceview’s Board of Directors recently met with Tyler Kiser, Executive Director, and you, the organization’s controller. With advertising deadlines for the grand opening quickly approaching, the purpose of the meeting was to discuss the need to set admission prices to ensure they cover operating costs. Tyler notes that Scienceview is the recipient of a government subsidy (Appendix I) that requires free admission for preschool children and seniors for the first two years of the program. He also provides data from an initial market study and cost estimates (Appendix II). Given the restrictions of the subsidy, he asks you to recommend an appropriate admission price for the first two years and draft an initial operating budget based on that price.
Scienceview’s long-term viability must also be considered. The municipality was clear that it could not provide a subsidy after the second year. Given this, the board wondered whether it could continue admitting senior citizens and preschool children free of charge and still break even. The Board has provided two proposed pricing policies for year 3 onwards (Appendix III). Tyler asks you to review these and recommend an admission pricing policy for the third and subsequent years.
Tyler is not crazy about changing prices 2 years in and is wondering if Scienceview should use its year 3 break-even prices in years 1 and 2 as well. He is not sure how this might impact the budget for the first two years. The Board is also concerned that if this were done then Scienceview would no longer need the full amount of the $750,000 subsidy to break even in the first two years; Scienceview does not want to lose this subsidy, and is wondering if there are any suggestions they could make to the municipality to restructure the grand to help ensure Scienceview’s long-term viability. Tyler has heard that other organizations have received capital support for infrastructure. He wonders how this could be proposed to the municipality.
Tyler has asked you to prepare a memo with your analysis and recommendations for the issues identified.

Appendix I
Government Grants and Subsidies
Provincial grant
Scienceview’s initial construction and start-up costs were funded by provincial government grants. The provincial government requires Scienceview to operate on a break-even basis without the need for further provincial government funding.
Municipal subsidy
Scienceview’s will receive a subsidy granted by the municipality of $750,000 per year for the first two years.
• As a condition of the municipal subsidy, seniors and preschool children are to be
granted free admission for the first two years.
• The municipality will partner with Scienceview to make the planetarium a premier tourist attraction.
Appendix II see excel attachment for range of admissions
Expected Admission Levels and Operating Cost Data
A market study confirmed that most science attractions have one price for adults and students. It is approved by the board that adults and students will be charged the same admission price at Scienceview. It was estimated that 30% of the admissions would be adults, 50% students and 20% senior citizens and preschool children. Demand for admissions to Scienceview would be relatively inelastic with prices at or below $8.50 per person. The study also produced the following probability distribution for total annual admissions (adults, students, senior citizens and preschool children) for the first two
years of operations assuming an admission price of up to $8.50:
Range of Admissions
Low Midpoint High Probability
600,000 650,000 700,000 0.15
700,001 750,000 800,000 0.25
800,001 850,000 900,000 0.40
900,001 950,000 1,000,000 0.15
1,000,001 1,050,000 1,100,000 0.05
Tyler has suggested that the midpoint for the annual number of admissions should be
used to develop estimates, but would like to see a sensitivity analysis done on the
break-even price, based on the different levels of demand.
Initial analysis provided the following cost estimates:
• Fixed operating costs: $4,683,000 per year
• Variable cost per person: $1.067
Appendix III
Potential Pricing Policies for Year 3 Onwards
• Continue to admit senior citizens and preschool children free of charge, and
increase the annual promotion and advertising expenditures by $325,000. It is
estimated that the additional annual expenditure on promotion and advertising would sustain a 12% increase in total number of admissions.
• Charge senior citizens and preschool children an admission price equal to 60% of the admission price charged to adults and students

Appendix II: Expected Admission Levels and Operating Cost Data

Range of admissions
Low Midpoint High Probability
600.000 650.000 700.000 0,15
700.001 750.000 800.000 0,25
800.001 850.000 900.000 0,40
900.001 950.000 1.000.000 0,15
1.000.001 1.050.000 1.100.000 0,05

Scienceview National Planetarium (Scienceview) is a recently establ...