Peter is a
qualified fitness instructor. He used to work at a luxury gym
in-country X. Customers of this luxury gym pay a high monthly
membership fee no matter how many times they visit. There are no
additional fees. Peter enjoys helping people get fit and lose
weight and he enjoys teaching exercise classes. Peter wanted to
help more people to get fit or build up their muscles, so he
decided to set up his own gym. Peter thought there was a demand for
low-priced gyms that allowed people to pay each time they used it
rather than pay a high monthly fee. So he left his job and set up
his own gym in a low-income part of the city. Peter named his
business Value Gym (VG) and opened it three months ago. Peter
needed a large bank loan to help him set up his gym as he only had
$5 000 of his own money. He is a sole trader. He prepared a
business plan to show the bank manager. VG has been very
successful, and Peter is expecting to make a profit by the end of
his first year as an entrepreneur. However, he still wants to
attract more customers to the gym. He knows that marketing will be
very important if his business is to expand. Peter has estimated
that VG will soon need 4 personal trainers to work in the gym.
Peter has not decided whether to employ these personal trainers or
to allow personal trainers who work for themselves to use VG's
facilities for a fee. The gym is open from 0600 until 2200, 7 days
a week. Customers pay for each day they use the gym. In addition,
customers can pay for a personal trainer if they want individual
tuition.
- Value Gym Vg Peter Is A Qualified Fitness Instructor He Used To Work At A Luxury Gym In Country X Customers Of This 1 (40.73 KiB) Viewed 17 times
customer = $5
Price per day to use
the gym = $10
Maximum capacity of
the gym = 50 customers per day
Appendix
3
City News
April 2018
Demand for gyms is
expected to increase
The government of country X is worried about the increasing
health problems of the population. It wants more people to lose
weight and get fit. This could make employees more productive and
increase output for the businesses where they work. A government
grant is being given to anyone who owns a gym and has more than 20
customers a day. It is planned that the grants will be used to
encourage more people to use a gym and get fit. There is expected
to be an increase in demand for personal trainers, especially to
work in the evening. They will need to have qualifications in
personal training to meet the health and safety regulations for
working in a gym. Most personal trainers are paid the minimum wage.
However, it is expected that their wages will have to increase, as
there will be a shortage of personal trainers until more people can
gain qualifications in personal training.
(i) Refer to Appendix 2. Complete the break-even chart below by
drawing the Total Revenue line?
- Value Gym Vg Peter Is A Qualified Fitness Instructor He Used To Work At A Luxury Gym In Country X Customers Of This 2 (37.37 KiB) Viewed 17 times
the number of break-even customers per day?
iii. Consider the following two ways Peter
could use to try to increase profit. Recommend which way he should
choose. Justify your answer?
Increase prices:
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Reduce variable
costs:
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Recommendation:
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D Appendix 2 Break-even chart for VG 500 400- 300- 200 100- 0- 0 10 20 30 customers per day 40 Total Costs Fixed Costs 50
(b) (i) Refer to Appendix 2. Complete the break-even chart below by drawing the Total Revenue line. 500- 400- Total Costs 300 200 100 Fixed Costs $ 0- 10 20 30 40 0 customers per day (ii) Identify the number of break-even customers per day? 50