Matchpoint Racquet Club (MRC) is a sports facility that offers tennis, racquet ball and other physical...
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Matchpoint Racquet Club (MRC) is a sports facility that offers tennis, racquet ball and other physical fitness facilities to its members. MRC owns and operates a large club with 2,000 members in a metropolitan area. The club has experienced cash flow problems over the last five years, especially during the summer months when both court use and new membership sales are low. Temporary bank loans have been obtained to cover the summer shortages. The owners have decided to take action to improve MRC's net cash flow position. They have asked the club's financial manager to prepare a projected cash budget based on a proposed revised fee structure. The proposal would increase membership fees and replace the hourly tennis and racquet ball court fees with a quarterly charge that would allow unlimited usage of the courts. The new rates would remain competitive when compared to the rates of other clubs in the area. Although there will be some members who do not renew because of the increase in price, management believes that the offer of unlimited court time will increase membership by 10%. The proposed fee structure is shown below, along with the current membership distribution. The membership distribution is assumed to remain unchanged. All members would be required to pay the quarterly court charges. Proposed Fee Structure Membership Category Individual Student Family Membership Distribution Individual Student Family Projected Membership Payment Activity Quarter 1 2 3 4 Annual Membership Fees $300 180 600 New 100 70 50 200 REQUIRED: 60% 10% 30% Renewed 700 330 150 600 Quarterly Court Charges $50 40 90 Court Time in Hours Prime Regular 5.000 7.000 2.000 4.000 1.000 2.000 5.000 7.000 The average membership during the third quarter is projected to be 2,200 people. Fixed costs are $157,500 per quarter, including a quarterly depreciation charge of $24.500. Variable costs are estimated at $15 per hour of total court usage time. B. How would sensitivity analysis help MRC management in the decision-making process? C. Identify at least four factors that MRC should consider before implementing this decision. Matchpoint Racquet Club (MRC) is a sports facility that offers tennis, racquet ball and other physical fitness facilities to its members. MRC owns and operates a large club with 2,000 members in a metropolitan area. The club has experienced cash flow problems over the last five years, especially during the summer months when both court use and new membership sales are low. Temporary bank loans have been obtained to cover the summer shortages. The owners have decided to take action to improve MRC's net cash flow position. They have asked the club's financial manager to prepare a projected cash budget based on a proposed revised fee structure. The proposal would increase membership fees and replace the hourly tennis and racquet ball court fees with a quarterly charge that would allow unlimited usage of the courts. The new rates would remain competitive when compared to the rates of other clubs in the area. Although there will be some members who do not renew because of the increase in price, management believes that the offer of unlimited court time will increase membership by 10%. The proposed fee structure is shown below, along with the current membership distribution. The membership distribution is assumed to remain unchanged. All members would be required to pay the quarterly court charges. Proposed Fee Structure Membership Category Individual Student Family Membership Distribution Individual Student Family Projected Membership Payment Activity Quarter 1 2 3 4 Annual Membership Fees $300 180 600 New 100 70 50 200 REQUIRED: 60% 10% 30% Renewed 700 330 150 600 Quarterly Court Charges $50 40 90 Court Time in Hours Prime Regular 5.000 7.000 2.000 4.000 1.000 2.000 5.000 7.000 The average membership during the third quarter is projected to be 2,200 people. Fixed costs are $157,500 per quarter, including a quarterly depreciation charge of $24.500. Variable costs are estimated at $15 per hour of total court usage time. B. How would sensitivity analysis help MRC management in the decision-making process? C. Identify at least four factors that MRC should consider before implementing this decision.
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Answer rating: 100% (QA)
B Sensitivity analysis would help MRC management in the decisionmaking process by providing insights into the potential impact of variations in key factors on the projected cash budget It allows manag... View the full answer
Related Book For
Operations Management Processes And Supply Chains
ISBN: 9781292409863
13th Global Edition
Authors: Lee Krajewski, Naresh Malhotra, Larry Ritzman
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