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Prepare a memo for Sue and make recommendations based on your quantitative and qualitative analyses. Critically examine the calculations and projections made by the tax-accountant and address the following: 1. Provide an alternate set of calculations (in contribution format), taking into account, the information in Tables 1 to 4, to provide further insight (if any) to Sue. Make your assumptions explicit, while making these calculations. 2. Suggest some strategic and operational choices that Sue might have to make, based on clear quantitative and qualitative analyses of her situation, to improve the profitability of MCS and achieve its mission. 3. Describe the management accounting tool that you may have used to come up with the alternate projections in 1) above. Discuss the benefits and limitations of this tool. 4. Discuss other factors would Sue need to consider before going ahead with the project. Duration Table 1 - Culinary courses Name Targeted market Segment Just for fun Fun (team building) (CSR) cooking lessons for organizations and its employees as part of their CSR initiative # of courses planned #of students per per year course 30 10 Duration details 2 days a week/ 6 hours a day Weekend Weekend 30 10 Weekend Course Lessons for young kids/community members who are learning how to cook, with a focus on healthy meals 2 days a week/6 hours a day Jeune Chef 4 weeks 20 13 Individual lessons for professionals/semi- professionals who aspire to become better rated chefs 3 days a week, 2 hours a day 4 weeks 13 20 Group Classes 3 days a week, 2 hours a day Group lessons for amateur groups, who wish to enroll together as friends/family and learn some quick cooking skills for everyday meals Cost Type Activity driver Direct/Variable costs Number of students Remarks Table 2 (Costs) Costs heading Grocery produce and other food items Grocery, produce and other food items Course Materials Lunch & Refreshments Instructor's compensation Direct/Variable costs Number of students Description For 4-week courses, per student/per hour sto For weekend courses, per student/per hour $$ For all courses S 40 per student Per day per student, $40 Instructor's compensation details: per instructor hour $60 $5,000 cach; Useful life 10 years: No salvage value. Cost $100,000 $2,000 per cooking station 20 Cooking stations Equipment/Cutlery, etc. for the cooking stations Utilitics $2,500 per month Communication Costs $1,000 per month Direct/Variable costs Number of students Direct/Variable costs Number of students Only for weekend courses Direct/Variable costs Number of Instructional bours Indirect Fixed Costs Number of student Depreciation is a factor of the extent of student hours usage Indirect/Fixed Costs Number of student Depreciation is a factor of the extent of student hours usage Indirect/Semi Number of student Utility consumption is a function of students' Variable hours presence/usage Indirect/Semi Common costs Cannot be traced to course groups Variable Indirect/Fixed Costs Number of student Space usage is a function of students' presence hours IndirectFixed Costs Common costs Cannot be traced to course groups Indirect/Fixed Costs Number of student Cleaning maintenance requirements is a hours function of students' presence and usage of facilities DirectFixed Costs Number of courses See note below which can be translated to per student Rental Costs $8,000 per month Insurance costs per year Cleaning & Maintenance $5,000 3 hours per day; 365 days @ $20 per hour Advertising/Marketing Marketing and Advertising costs are approximately $1,000 per course offering or $86,000 per year Note: The strategic goal is to increase the demand for weekend courses as it is yet an untapped market; The fees for such courses can also be increased and there may be cross marketing opportunities of the 4-week courses. Hence Advertising/Marketing & Promotional expenses for the weekend programs (on subsequent verification, after the tax accountant finalized the projections) may work to be nearly $1,250 per weekend course offering, and the balance can be allocated for the 4-week courses. 7 Table 3 (Cost per student calculations) Cost heading Culinary Instructor's compensation Costs Remarks 80,640 Per instructor hour - $60 48,000 Per students $40 >> 600 students * 2 days * $40 - $48,000 Lunch & Refreshments (only for weekend courses) Course Materials 44,800 Per student = $40>>1120 students * $40 Grocery, Produce and other food items Grocery, Produce and other food items Total 124,800 For 4-week courses, per student/per hour $10 >> 260+260 students * 3 days * 2 hours *4 weeks* $10 36,000 For weekend courses, per student/per hour $5>> 300+300 students * 2 days * 6 hours * $5 $334,240 Number of students student 1,120 $298.429 Cost per the fees at $399 per participant, as course fees. Thereon she commissioned her tax-accountant to estimate the profitability of the institute and if possible, individual courses. Sue's tax-accountant reverted in a week's time and reported a broad summary of operations and profitability (see Table 4) and a cost per student (see Table 3). In his calculations, although the individual courses looked profitable with a positive contribution margin, overall MCS was projected to make a loss of $152,260.00 in the first year of operations. This unnerved her no end. Despite the fact that Sue was passionate about cooking and sharing her skills, she was not yet ready to make such a significant investment of her personal time and resources for a loss-making operation. Her conversations with the tax accountant was not enlightening or encouraging either. For example, she was not sure why the accountant combined many of the costs as common costs ($264,900) and not related it to the individual course groups. She also felt that the cost per student around ($298) across all the courses, did not appear right. That is when she remembered her dearest high school friend, you. She immediately got on phone with you. It was now left in your safe hands to save Sue's worthy culinary school! Malaspina Culinary School ( MCS) Not for nothing was Sue Thomas, an acclaimed star chef. Coming from a family of culinary experts dating back three generations, it was Sue's great grandmother who was an inspiration behind her great grandfather becoming a famous chef during a time when women were hardly recognized in this profession. Sue was not only a great chef but also had the rare ability to share her knowledge and skills by training young budding cooks. One fine spring morning, in April 2020, from her beautiful waterfront home in Vancouver Island, when the world was crippled due to the COVID-19 pandemic, Sue started to formalize her long time dream of setting up a culinary institute to offer various courses to train and improve participants' culinary skills. She took some notes on the type of courses that she might be passionate about and in a moment of creative flourish, coined a name for the institute (Malaspina Culinary School) and also some names and descriptions for the cooking courses she wished to offer (see Table 1). One of her broad strategic goals is to bring cooking to the corporate world and to the community. She wished to offer weekend courses to employees to learn healthy cooking, while also having fun. She also wished to offer a similar program for the young kids and community at large, which potentially could bring back the health and fun element to cooking. She deeply detested the fast-food culture and held the view that it was singularly responsible for many modern-day malaises. Her mission was to bring the joy of delightful cooking and mindful eating back into everyone's lives. Over the next couple of weeks, she held Zoom conferences with her tax accountant and shared broad details about the type of courses on offer, in terms of its duration, scheduling, and so on (see Table 1). She also carried out extensive research to come up with an estimate of costs with the help of her tax accountant (see Table 2). She realized that not all these costs may be applicable for all courses that she intended to offer, however being unsure how to organize those costs and revenues to calculate profitability, she relied on her tax accountant. She did place a higher emphasis on Advertising/Marketin costs with a greater focus on Corporate clients and Community/Young weekend participants. She was also particular that cleaning and maintenance be carried out throughout the year to maintain good hygienic discipline. Since she wanted to make this affordable to most participants, she was keen to peg Prepare a memo for Sue and make recommendations based on your quantitative and qualitative analyses. Critically examine the calculations and projections made by the tax-accountant and address the following: 1. Provide an alternate set of calculations (in contribution format), taking into account, the information in Tables 1 to 4, to provide further insight (if any) to Sue. Make your assumptions explicit, while making these calculations. 2. Suggest some strategic and operational choices that Sue might have to make, based on clear quantitative and qualitative analyses of her situation, to improve the profitability of MCS and achieve its mission. 3. Describe the management accounting tool that you may have used to come up with the alternate projections in 1) above. Discuss the benefits and limitations of this tool. 4. Discuss other factors would Sue need to consider before going ahead with the project. Duration Table 1 - Culinary courses Name Targeted market Segment Just for fun Fun (team building) (CSR) cooking lessons for organizations and its employees as part of their CSR initiative # of courses planned #of students per per year course 30 10 Duration details 2 days a week/ 6 hours a day Weekend Weekend 30 10 Weekend Course Lessons for young kids/community members who are learning how to cook, with a focus on healthy meals 2 days a week/6 hours a day Jeune Chef 4 weeks 20 13 Individual lessons for professionals/semi- professionals who aspire to become better rated chefs 3 days a week, 2 hours a day 4 weeks 13 20 Group Classes 3 days a week, 2 hours a day Group lessons for amateur groups, who wish to enroll together as friends/family and learn some quick cooking skills for everyday meals Cost Type Activity driver Direct/Variable costs Number of students Remarks Table 2 (Costs) Costs heading Grocery produce and other food items Grocery, produce and other food items Course Materials Lunch & Refreshments Instructor's compensation Direct/Variable costs Number of students Description For 4-week courses, per student/per hour sto For weekend courses, per student/per hour $$ For all courses S 40 per student Per day per student, $40 Instructor's compensation details: per instructor hour $60 $5,000 cach; Useful life 10 years: No salvage value. Cost $100,000 $2,000 per cooking station 20 Cooking stations Equipment/Cutlery, etc. for the cooking stations Utilitics $2,500 per month Communication Costs $1,000 per month Direct/Variable costs Number of students Direct/Variable costs Number of students Only for weekend courses Direct/Variable costs Number of Instructional bours Indirect Fixed Costs Number of student Depreciation is a factor of the extent of student hours usage Indirect/Fixed Costs Number of student Depreciation is a factor of the extent of student hours usage Indirect/Semi Number of student Utility consumption is a function of students' Variable hours presence/usage Indirect/Semi Common costs Cannot be traced to course groups Variable Indirect/Fixed Costs Number of student Space usage is a function of students' presence hours IndirectFixed Costs Common costs Cannot be traced to course groups Indirect/Fixed Costs Number of student Cleaning maintenance requirements is a hours function of students' presence and usage of facilities DirectFixed Costs Number of courses See note below which can be translated to per student Rental Costs $8,000 per month Insurance costs per year Cleaning & Maintenance $5,000 3 hours per day; 365 days @ $20 per hour Advertising/Marketing Marketing and Advertising costs are approximately $1,000 per course offering or $86,000 per year Note: The strategic goal is to increase the demand for weekend courses as it is yet an untapped market; The fees for such courses can also be increased and there may be cross marketing opportunities of the 4-week courses. Hence Advertising/Marketing & Promotional expenses for the weekend programs (on subsequent verification, after the tax accountant finalized the projections) may work to be nearly $1,250 per weekend course offering, and the balance can be allocated for the 4-week courses. 7 Table 3 (Cost per student calculations) Cost heading Culinary Instructor's compensation Costs Remarks 80,640 Per instructor hour - $60 48,000 Per students $40 >> 600 students * 2 days * $40 - $48,000 Lunch & Refreshments (only for weekend courses) Course Materials 44,800 Per student = $40>>1120 students * $40 Grocery, Produce and other food items Grocery, Produce and other food items Total 124,800 For 4-week courses, per student/per hour $10 >> 260+260 students * 3 days * 2 hours *4 weeks* $10 36,000 For weekend courses, per student/per hour $5>> 300+300 students * 2 days * 6 hours * $5 $334,240 Number of students student 1,120 $298.429 Cost per the fees at $399 per participant, as course fees. Thereon she commissioned her tax-accountant to estimate the profitability of the institute and if possible, individual courses. Sue's tax-accountant reverted in a week's time and reported a broad summary of operations and profitability (see Table 4) and a cost per student (see Table 3). In his calculations, although the individual courses looked profitable with a positive contribution margin, overall MCS was projected to make a loss of $152,260.00 in the first year of operations. This unnerved her no end. Despite the fact that Sue was passionate about cooking and sharing her skills, she was not yet ready to make such a significant investment of her personal time and resources for a loss-making operation. Her conversations with the tax accountant was not enlightening or encouraging either. For example, she was not sure why the accountant combined many of the costs as common costs ($264,900) and not related it to the individual course groups. She also felt that the cost per student around ($298) across all the courses, did not appear right. That is when she remembered her dearest high school friend, you. She immediately got on phone with you. It was now left in your safe hands to save Sue's worthy culinary school! Malaspina Culinary School ( MCS) Not for nothing was Sue Thomas, an acclaimed star chef. Coming from a family of culinary experts dating back three generations, it was Sue's great grandmother who was an inspiration behind her great grandfather becoming a famous chef during a time when women were hardly recognized in this profession. Sue was not only a great chef but also had the rare ability to share her knowledge and skills by training young budding cooks. One fine spring morning, in April 2020, from her beautiful waterfront home in Vancouver Island, when the world was crippled due to the COVID-19 pandemic, Sue started to formalize her long time dream of setting up a culinary institute to offer various courses to train and improve participants' culinary skills. She took some notes on the type of courses that she might be passionate about and in a moment of creative flourish, coined a name for the institute (Malaspina Culinary School) and also some names and descriptions for the cooking courses she wished to offer (see Table 1). One of her broad strategic goals is to bring cooking to the corporate world and to the community. She wished to offer weekend courses to employees to learn healthy cooking, while also having fun. She also wished to offer a similar program for the young kids and community at large, which potentially could bring back the health and fun element to cooking. She deeply detested the fast-food culture and held the view that it was singularly responsible for many modern-day malaises. Her mission was to bring the joy of delightful cooking and mindful eating back into everyone's lives. Over the next couple of weeks, she held Zoom conferences with her tax accountant and shared broad details about the type of courses on offer, in terms of its duration, scheduling, and so on (see Table 1). She also carried out extensive research to come up with an estimate of costs with the help of her tax accountant (see Table 2). She realized that not all these costs may be applicable for all courses that she intended to offer, however being unsure how to organize those costs and revenues to calculate profitability, she relied on her tax accountant. She did place a higher emphasis on Advertising/Marketin costs with a greater focus on Corporate clients and Community/Young weekend participants. She was also particular that cleaning and maintenance be carried out throughout the year to maintain good hygienic discipline. Since she wanted to make this affordable to most participants, she was keen to peg