10.71 Refining Cost Drivers (LOI-LO3). Tom and Lynda are considering several actions in response to another gym opening nearby. Tom believes that Hercules should focus on actions that target family memberships, as he believes family memberships to be more profitable than individual memberships. He therefore wishes to add more classes and other activities of greater interest to families. Lynda is less sure because she thinks that families also use the gym more intensively. She thinks that individuals might cost less (even if their apparent usage is more) because they tend to focus on using easy to maintain and long-lasting exercise equipment (e.g., dumbbells) rather than costly items such as the pool. They provide you with the following data for the average month regarding uses and costs. Individuals Family Number of memberships 500 200 Persons per membership # of visits per person Minutes on exercise equipment per person 120 # of class sessions attended per person Minutes on cardio machines per person 120 120 # of visits to pool per person 0.2 0.5 % paying membership fees paid using a credit card 50% 80% Membership fee $100 $160 Variable costs Suppliestowels, etc. $22,500 Suppliesfor classes 2,500 Water (50% relates to pool and 50% relates to showers) 3,000 Credit card fees 1,012 Fixed costs Estimated wear and tear on cardio equipment 1,500 Estimated wear and tear on weights and related equipment 900 Instructor salaries and other class-related costs 12,000 Pool maintenance 1,200 Utilities (electric and gas) 2,500 Staff salaries (front desk, office) 13,500 Rental and maintenance for building 5,000 Other admin expenses 3,500 Total costs $69,112 Required: a. Allocating all costs (fixed and variable) using the number of visits as the allocation basis, what is the profit per individual and family membership? b. Develop suitable drivers for each of the costs (except for items you deem to be facility-level costs). What is the profit per individual and family membership? c. Based on your answers to the above parts, what advice might you offer to Tom and Lynda