The Stratton Township Park is located on a piece of property that contains two golf courses, a swimming pool, and 800 acres of woods and open spaces. Three years ago, the Stratton Park Department (Stratton) carved out miles of trails to allow visitors to hike the property and enjoy nature. To make that experience more enjoyable for visitors and available to school groups, Stratton decided to offer guided tours that have proven popular. It has also found that the availability of the hiking trails has increased park visits.
To operate the park, the pool, and the two golf courses, Stratton employs a full-time park manager with an $ 80,000 annual salary, an assistant manager who earns $ 45,000 per year, and a full- time maintenance staff who earn a total of $ 350,000 per year. The assistant manager spends 50 percent of her time managing the golf course, 15 percent on pool operations, 5 percent organizing concerts, and the remainder on general park operations. Benefits for these full- time employees add 35 percent to personnel costs. Total depreciation for the coming year will be $ 450,000. Of that amount, $ 25,000 is for the park’s central facility where the manager and assistant manager work. Central supply and central utility costs are expected to be $ 10,000. Utility and fuel costs for the trail and wilderness areas of the park are an additional $100,000 per year. Stratton expects 30,000 cars full of people to come to the park in the coming year. Stratton charges $8 for parking.
Question 1: Prepare an annual program budget for the Stratton Township Park including golf operations; the pool; concerts; other park activities including tours, nature visitors, and general concessions; and administrative costs. Show line- item details for each func-tion by natural account and summarize the budget for the park as a whole.
Question 2: Based on the information in the budget, find the break- even green fees for the golf course and the break- even admissions charges for the pool. You may assume that the volume of users would not change with increases in pricing. You may also assume that the course will operate for a full 130 days.
a. Do both break- even analyses based on the cost of delivering the services with and without the allocated management salaries.
b. Do you think the park can realistically charge these fees to park users? What might the consequences of raising the fees be economically, politically, and in a public relations sense?
Question 3: The park manager wants to know whether it would make sense to shut down one or more of the operations at the Stratton Township Park. Determine the impact of shut-ting down the golf course, the pool, the concert series, and the tours and show the overall marginal impact of making each of these changes. Be sure to include all marginal revenues and marginal expenses in your calculations.
Question 4: After completing these analyses, the manager has decided to recommend three changes to the park’s budget.
First, he plans to increase green fees for golf to $ 5 above the break- even price excluding allocated management costs and rounded to the next highest multiple of $. 50. Since competitive private clubs in the region charge $ 100 or more for a round of golf, he does not believe that an increase in price will result in a decline in the number of golfers using the course.
Second, he wants to raise pool admission charges to $ 4.50. Given the demographics of those who use the pool, he believes that raising prices by $ 1.00 will result in a 5 percent drop in attendance.
Third, he wants to eliminate three of the concerts the township had planned for the next year.
Prepare a revised budget for the Stratton Township Park reflecting these changes. Will these budget modifications meet the township’s goal of reducing the subsidy it would have given to the park in the next fiscal year by 20 percent?
Question 5: After receiving your analysis of the impact of eliminating concerts, and raising green fees and pool admission charges, the park manager has asked you to come up with some additional proposals for meeting the township’s subsidy reduction goal. What would you recommend?

  • CreatedDecember 19, 2014
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