BUS 630 Week 4 Assignment
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week5casestudy.docxBUS630 Week 5 Case Guidance
Class,
The Week 5 Case is somewhat challenging. Below are some approaches -
For Q1, since the center is operational, all of these decisions are based on incremental data. That is, we look for incremental revenues and costs.
For Part A, you will calculate the Incremental Costs for each Age Group and then determine the Tuition Change Rate. Below is the example for the age Group 2-3 and you can follow the same logic and complete the calculations for the other three Age Groups.
Percentage
New Increase
Instructor Average over
to Student Total Number of Incremental Tuition Current
Age Ratio Children New Classes Costs Increase Tuition
2-3 6:1 20 2 $3,920 $196.00 61%
34 47%
4-5 47%
(b) To determine is profitable, you can calculate the incremental profit from these 10 students. Please follow the following template and determine the incremental profit. $355 is the check figure.
Incremental revenue $
Minus incremental costs:
Instructor's salary
Staff benefits
Food
Variable supplies
Incremental profit $355
(c) Again, here you will do some incremental analysis. The check figures are provided.
Incremental revenue:
Increased fees, old students:
23 age group ($196*20) $3,920
34 age group
45 age group
56 age group
New students:
23 age group ($516*5) $2,580
34 age group
45 age group
56 age group
Total incremental revenue $16,455
Minus incremental costs:
Instructors (7 new class * $1,600) $11,200
Staff benefits
Food
Variable supplies
Total incremental costs (14,205)
Incremental profit $2,250
This alternative increases profits by $2,250.
(d) Again, calculate the Incremental Profit for the New infant care:
Incremental revenue
Incremental costs:
Instructor
Staff benefits
Variable supplies
Incremental profit $615
The infant care class is profitable since it contributes $615 to net income.
(2) Memo:
To: Mr. Friedman and Mr. Compton
From: Analyst
With above numbers, you can now complete the Memo. Be sure to incorporate the numbers in your recommendations.
