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Memo

This memo is written to highlights the main recommendations for improving the profitability for Middlehurst House made by our online exam help researchers. If we look after the present condition we found that the profitability is very low as given below:-

Current Revenue	22600
Adjustments	1100
Current Expenses	21000
Current Profit	500

Besides lower profitability, the other problem is quality of instruction which is also low due to lower teacher to instruction ratio. Now if we improve it as per the instruction given in the case and as per the ratios given below, we found that we need to improve the profitability by 35% for all classes as given below:-

New Class distribution	No. of Classes	Children per class	Total Children	Monthly tuition per children
2 to 3	3	6	20	320
3 to 4	2	8	15	280
4 to 5	2	8	15	280
5 to 6	3	10	30	260
No. of old instructors	6
No. of new instructors	10
Earlier salary per instructor	1600
Increase in salary	6400
Increase in staff benefits	1440
Increment in Total Expense	7840
New Required revenue	30440
Increment in Tuition fees required	35%

 

Now, look on to the other aspects of analysis i.e. the effect of addition of a new class in the age group 5-6 in the profitability from the base case. From the analysis we found that it will increase the profitability to almost more than double i.e. $1103 as given below:-

New Class distribution	No. of Classes	Children per class	Total Children	Monthly tuition per children
2 to 3	2	10	20	320
3 to 4	1	15	15	280
4 to 5	1	15	15	280
5 to 6	3	15	41	260
Total Revenue	25460
Increase in variable supplies	132
Increase in instructor cost	1600
Increase in staff benefits	360
Increase in food costs	165
New Expense	23257
New profit	1103

Now, if the same addition of class will be done after increasing the fees as we saw in first analysis, we found that it will improve the profitability to more than triple i.e. to $1744.94 as shown below:-

New Class distribution	No. of Classes	Children per class	Total Children	Monthly tuition per children
2 to 3	3	6	20	431.0088496
3 to 4	2	8	15	377.1327434
4 to 5	2	8	15	377.1327434
5 to 6	4	10	40	350.1946903
Total Revenue	33941.9469
Increase in variable supplies	132
Increase in instructor cost	1600
Increase in staff benefits	360
Increase in food costs	165
New Expense	31097
New profit	1744.946903

Now, let’s look on to the other aspect i.e. what will happen if the fess for all classes will be kept at same level  i.e. equivalent to first class, we found that it will improve the profit by 7 times as given below:-

Current Revenue	22600
Adjustments	1100
Current Expenses	21000
Current Profit	500
New Class distribution	No. of Classes	Children per class	Total Children	Monthly tuition per children
2 to 3	3	6	20	320
3 to 4	2	8	15	320
4 to 5	2	8	15	320
5 to 6	3	10	30	320
New Revenue	25600
Adjustments	1100
Expenses	21000
New Profit	3500

So the entire analysis shows that the best strategy will be to increase the class of 5 to 6 class from the waiting list and increase the fees of first three age group by 25% since in the case it is given that at the age of 2 to 5 most of the parents support 25% increase whereas from 5 to 6 they do not want any increment. However, in the age group of 2-5 , 50% parents are ready for 50%. Hence, the above recommendations will not only increase profitability but it will also improve the quality and also it is as per the interest shown by the parents.