Currently, a zoo sees 40,000 visitors a year. Of this, approximately 22,000 are children. If admission is charged, Raj would like to offer a 50% discounted rate to children. There will be an initial fixed cost of $2,000 for a cash register and turnstile.

Raj anticipates that charging admission will cause a 25% decline in visitors to both the zoo and the caf in the first year but that this will rebound the following year and remain stable. He does not think this will result in any savings on operational costs. He would prefer to not change the dates he is open, as he finds the animals do best with a cycle of busy days and quiet days year-round as opposed to constant visitors in the summer and then no visitors for the rest of the year.

The zoo was granted a 10 year government grant of $100,000 per year. The grant is due to expire in two years and cannot be renewed.

Appendix Hapi's financial information Petting zoo Cafe Total Revenue - operations $ $ 80,000 $ 80,000 Revenue - donations 254,000 254,000 Revenue - grant 100,000 100,000 Cost of goods sold (45,000) (45,000) Gross margin 254,000 135,000 389,000 Animal maintenance 129,000 129,000 Repairs and maintenance (Note 1) 20,000 20,000 40,000 Utilities (Note 1) 12,000 12,000 24,000 Wages (Note 2) 60,000 60,000 120,000 Rent (Note 3) 36,000 36,000 72,000 Office supplies (Note 4) 2,000 2,000 4,000 Excess (deficit) of revenues over expenses $ (5,000) $ 5,000 $ Raj mentions that a number of the expenses are split 50/50 on the internal statement, as in the end it is all Hapi's financials and he doesn't want to spend a lot of time tracking each expense as either the petting zoo or cafe. He knows it isn't a perfect approach, but he just looks at the total column anyways. Note 1: Actual maintenance is 90% for the petting zoo and 10% for the cafe. This is the same breakdown for utilities. Raj expects that if the cafe adjusts to Petzy's hours of operations, and opens for more days during the year, then utilities will increase by 15%, but maintenance costs will remain the same. Note 2: Wages during operating hours are for three employees - two for the zoo and one for the cafe. All employees are paid equally. Note 3: The petting zoo and cafe have two separate lease agreements. The petting zoo is $60,000 which is renewed each year and not expected to increase whereas the cafe is $12,000 annually with eight years remaining on the lease term. Note 4: Raj believes the office supplies are split approximately 75% for the zoo and 25% for the cafe