Case 9A (Middlehurst House) - Coursework Example

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The three decisions being considered will be analyzed next. After the deduction of the expenses, $500 is what remains as the operating profit for the business. A better decision is…
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Case 9A (Middlehurst House)
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Download file to see previous pages A few though especially those who have children in 5-6 age group do not support any increase. Both scenarios will be analyzed separately to determine the best way forward.
Decreasing the size of the class and increasing tuition fee by 25% will not be the best thing to do since the business will operate at a loss. However, a decrease in class size followed by a 50% increase in tuition fee will be favored since the later generates $4,780 in profit. Both options, however, yield positive marginal profit as seen but fixed costs eat into the profits generated in the first option.
From the analysis, the best increase to maintain current profit levels would probably be X-(6,970+22,150) = 500 gives 29,620 for X. This is 8,120 more than the current revenue (21,500) which translates to 8,120/21500*100 = 37.7% required increase if the partnership must maintain the current profit levels after decreasing classes.
Creating of new classes will raise the cost especially by the new tutors who will be required to teach the extra students. Classes will not be functioned at their capacity, and this will lead to a loss of $261 as shown in the calculations above. It is therefore not the best decision for the daycare home.
It is profitable to create new classes from the waiting list while keeping small. This will generate $5,117, which is $4,617 more than the current profits. Other factors have to be carefully analyzed apart from the current costs (Brewer, 2008).
Starting an infant class will be a good thing to do if classes are decreased and new rates are in effect. The effect of adding a single infant class is evaluated below. According to Hoffjan & Wömpener (2006), evaluation of several situations is necessary to arrive at the best.
From the analysis, the management is best placed if it does two simultaneous decisions at the same time i.e. decreasing class size by increasing tuition fee by 37.7% and starting of ...Download file to see next pagesRead More
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