Hockey Camp

Required:
1. If Oldcraft hires enough coaches to meet the average enrollment and achieves all
of the averages previously given, what will be her profit?
Total Revenue ( $225 x 90 campers) $20,250.00
Variable Costs:
Food, charge by college 4,500.00
2. What
Insurance and T-shirts 1,350.00
Room rent charged by college 1,620.00 price
College share in reveneue 2,025.00 9,495.00 will
Contribution Margin $10,755.00 enable
Fixed Cost: her to
Coaches' salaries 3,300.00 earn
Ice arena charge 1,000.00 $4000
Brochure, mailing, miscellaneous 3,700.00 8,000.00
PROFIT $2,755.00
enrolling 100 campers?
Variable Costs:
Food, charge by college 5,000.00
Insurance and T-shirts 1,500.00
Room rent charged by college 1,800.00
Total 8,300.00
Fixed Cost:
Coaches' salaries 3,850.00
Ice arena charge 1,000.00
Brochure, mailing, miscellaneous 3,700.00
Total 8,550.00

Let:
x= Price per campers
Total revenue= 100x
College Share= 10% x 100x= 10x

Revenue= Variable Cost + Fixed Cost + College Share + Target Profit

100x = 8,300 + 8,550 + 10x + 4,000
90x = 20,850
x = 20,850 / 90
x = $231.67

3. The college offers to take over the cost of brochures, mailing, and miscellaneous
($3700 estimated) in exchange for a higher share of the revenue. If Oldcraft
achieves the results from requirement 1 (meets the averages), what percentage
of revenue will she be able to pay the college and earn the same profit expected
in requirement 1?

Total Revenue ( $225 x 90 campers) $20,250.00

Variable Costs:
Food, charge by college 4,500.00
Insurance and T-shirts 1,350.00
Room rent charged by college 1,620.00 7,470.00
Contribution Margin $12,780.00
Fixed Cost:
Coaches' salaries 3,300.00
Ice arena charge 1,000.00 4,300.00
Profit before the share of college in revenue $8,480.00
Less: Profit earned in requirement 1 2,755.00
College Share in revenue $5,725.00
 Percentage of Revenue = College Share in Revenue/ Revenue
Percentage of Revenue = 5,725 / 20,250
Percentage of Revenue = 28.27%

4. Write a memorandum to Oldcraft explaining the advantages and disadvantages

to her and to the college of the proposed arrangements. Use the guidelines in
Appendix A.
To: Jane Oldcraft Hockey Camp
From:
Date: December 09, 2022

Subject: Proposed Arrangements Analysis

Analysis:
Upon forecasting possible outcomes and considering some situations, the college
and Oldcraft has direct related to each other. If the college will cover the brochures,
mailings and miscellaneous it will directly affect Oldcraft as covering it up will
increase the share of the college to her revenue with a percentage from 10% to
28.27%, however, this will lessen her fixed cost.
Moreover, if the camp will possibly attracts more campers, both the college and her
will benefit if they were going to follow the 10% share of the college, but if in
opposite situation, Oldcraft will suffer even though the college takes over the $3,700,
the college will earn more than her, putting herself at risk. This concludes that it
varies on how they considered the $3,700, as it will concludes if they well be
affected directly or inversely.

CASE ANALYSIS - DON MASTERS AND ASSOCIATES LAW OFFICE

Don Masters and two of his colleagues are considering opening a law office in
a large metropolitan area that would make inexpensive legal services available to
those who could not otherwise afford these services. The intent is to provide easy
access for their clients by having the office open 360 days per year, 16 hours each
day from 7 am to 11 pm. The office would be staffed by a lawyer, paralegal, legal
secretary and clerk-receptionist for each of the two 8-hour shifts.

In order to determine the feasibility of the project, Masters hired a marketing

consultant to assist with market projections. The results of this study show that if the
firm spent $500,000 on advertising the first year, it could expect about 50 new clients
each day. Masters and his associates believe the estimate to be reasonable and are
prepared to spend the $500,000 on advertising. Other pertinent information about
the operation of the office follows:

The only charge to each new client would be $30 for the initial consultation.
All cases that warranted further legal work would be accepted on a contingency
basis with the firm earning 30% of any favorable settlements or judgments. Masters
estimates that 20% of new client consultations with result in favorable settlements or
judgments averaging $2,000. Masters expects no repeat clients during the first year
of operations.

The hourly wages of the staff are projected to be $25 for the lawyer, $20 for
the paralegal, $15 for the legal secretary, and $10 for the clerk receptionist. Fringe
benefit expense will be 40% of the wages paid.

Masters has located 6,000 square feet of suitable office space that rents for
$28 per square foot annually. Associated expenses will be $22,000 for property
insurance and $32,000 for utilities. The group will purchase malpractice insurance
 for $180,000 annually. The initial investment in office equipment will be $60,000,
which will be depreciated over four years. The cost of office supplies has been
estimated at $4 per expected new client consultation.

Required:

1. Determine the income the law office can expect if all goes according to plan

Consultation Revenue $540,000.00

Revenue from favorable 2,160,000.00
settlements
Variable Costs:
Office Supplies 72,000.00
Contribution Margin $2,628,000.00
Fixed Costs:
Advertising Expense 500,000.00
Salaries- Lawyer 144,000.00
Salaries- Paralegal 115,200.00
Salaries- Legal Secretary 86,400.00
Salaries- Clerk receptionist 57,600.00
Fringe Benefit Expense 161,280.00
Rent Expense 168,000.00
Property Insurance Expense 22,000.00
Utilities Expense 32,000.00
Malpractice Insurance Expense 180,000.00
Depreciation Expense 15,000.00 1,481,480.00
Profit/ Income $1,146,520.00

2. Determine how many new clients must visit the law office for the venture to break
even during its first year of operations

Break-even Point in Units = Fixed cost/ Contribution Margin per unit

= 1,481,480/ 146
= 10,147 clients

3. Write a memorandum stating whether Masters and his associates should proceed
with opening the law firm and state your justifications.

To: Don Masters and Associates Law Office

From:
Date: December 09, 2022

Subject: Opening of Don Masters and associates law office

Upon considering cost volume profit analysis, I would like to share my insights to
discuss with you on how to make your law office performance be more efficient,
competitive and have a better performance.

Comparing the result of the breakeven point per units which it determines how many
clients should visit the law firm in your first year operation and the estimated of number
of clients that the marketing consultant forecast, it is undeniably you can able to reach
the breakeven point easily and by knowing that there is 7,853 more clients, this would
have a significant impact in maximizing your profit or income for the first year of
operation. However, this doesn’t change the fact that there is still no guarantee of
achieving this as we should always consider the risks.
Moreover, I would like to suggest that you should reconsider the estimated numbers of
possible clients and forecast other number as it would help you to determine an average
estimation of the two outcomes. The 7,853 excess can be interpreted in two ways, first,
in your possible income or profit and second, is it can be risks if there is fortuitous
events will happen during the first year of operation. If you could not able to generate a
huge income the expenses of the succeeding year will take over it, putting you at a
serious risk of bankruptcy.