PRICING CASE STUDY AQUATICS CENTRE

Objective: Determine the price that should be charged per participant for the Elite Swim Team at the Aquatics Centre. 1. DETERMINE AQUATIC CENTRE OPERATING EXPENSES. Table 1: Aquatics Centre Fixed and Variable Operating Costs (per yer) Cost Year, Months, or hours Subtotal Total Fixed Costs Facility manager $50,000 1 year $50,000 Facility supervisor $35,000 1 year $35,000 Administrative overhead S455 per month 12 $5,460 Chemicals S1000 per month 12 $12,000 Total fixed costs ??? 1.1 ??? Variable Costs Life Guards (Full set) $50 per hour 3000 $150,000 Utilities $22 per hour 3000 $66,000 Front-desk staff $10 per hour 3000 $30,000 Maintenance $20 per hour 3000 $60,000 Total variable costs ??? 1.2 ??? Total fixed and variable costs ??? 1.3 ??? Demand = Facility is open 3000 hours per year 1.1. What are the Total Fixed Operating costs of the facility? 1.2. What are the Total Variable costs of the facility? 1.3. What are the total operating costs?

2. DETERMINE THE OPERATING COST FOR ONE HOUR OF POOL TIME P = price F = fixed costs V = variable costs C = contingency costs N = demand No contingency costs: P = (F + V)/N Contingency costs: P = (F + V + C[F + V])/N 2.1. What is Unit price (operating cost) for one hour of pool time with NO contingency costs 2.2. What is Unit price (operating cost) for one hour of pool time with contingency costs. Assume a 10% contingency cost associated with the facility. 3. DETERMINE THE SUBSIDY RATE FOR ONE HOUR OF POOL TIME FOR EACH OF THE PROGRAMS. ASSUME A 10% CONTINGENCY COST ASSOCIATED WITH THE FACILITY. P = price F = fixed costs V = variable costs C = contingency costs N = demand S = subsidy rate Unit cost = answer to 2.2 S = negative number if program to make profit S = 0 if breakeven S = positive number if subsidized P = ((F + V + C[F + V])/N) (1 S) OR P = Unit cost x (1 S) ** ok to use this one Programs Subsidy Service Pool cost per hour Open swim 0% Public ??? 3.1 ??? Party rental 20% Private ??? 3.2 ??? Elite swim team 15% Private ??? 3.3 ??? Lap swim 10% Merit ??? 3.4 ??? 3.1. Determine the cost for one hour of pool time for the open swim program. 3.2. Determine the cost for one hour of pool time for the party rental program. 3.3. Determine the cost for one hour of pool time for the elite swim team program. 3.4. Determine the cost for one hour of pool time for the lap swim program.

4. DETERMINE THE COST PER PERSON TO COVER THE ELITE SWIM TEAM PROGRAM COSTS Table 2: Elite Swim Team Program Budget (Demand: minimum of 20 participants; maximum of 30 participants) Cost Months or hours or person Subtotal Total Fixed Costs Head instructor $17 100 hours $1,700 Assistant instructor $14 100 hours $1,400 Pool time $??? Answer to 3.3 100 hours $??? Total fixed costs ??? 4.1 ??? Variable Costs Supplies $20.00 1 per person $20.00 Team swim cap $6.25 2 per person $??? Contingency cost $1 1 per person $1.00 Total variable costs ??? 4.2 ??? Total costs ??? 4.3 ??? Cost per person ??? 4.4 ??? Demand = The team meets for 2 hours, 2 times per week, 25 weeks in the year = 100 hours 4.1. What are the Total Fixed costs of the program? 4.2. What are the Total Variable costs of the program? 4.3. What are the Total Costs of the program? 4.4. Determine the price to charge each participant in order for the program to cover (break even) program costs. P = (F + V)/N 5. DETERMINE PRICE CHARGED PER PERSON FOR THE ELITE SWIM TEAM IF A 15% PROFIT (-15% Subsidy) WAS ALSO ADDED TO PROGRAM COSTS? Hint: You already know the hourly pool costs for a -15% subsidy this value ones change. But the other costs will be increased by 15%.

Table 3: Elite Swim Team Program Budget assuming a 15% profit Cost Months or hours or person Subtotal Total Fixed Costs Head instructor $17 100 hours $??? Assistant instructor $14 100 hours $??? Pool time $??? Answer to 3.3 100 hours $??? Total fixed costs ??? 5.1 ??? Variable Costs Supplies $20.00 1 per person $20.00 Team swim cap $6.25 2 per person $??? Contingency cost $1 1 per person $1.00 Total variable costs ??? 5.2 ??? Total costs ??? 5.3 ??? Cost per person ??? 5.4 ??? Demand = The team meets for 2 hours, 2 times per week, 25 weeks in the year = 100 hours 5.1. What are the Total Fixed costs of the program? 5.2. What are the Total Variable costs of the program? 5.3. What are the Total Costs of the program? 5.4. Determine the price to charge each participant in order for the program to cover (break even) program costs. P = (F + V)/N