**I need help with this breakeven analysis**

The Stonegate Country Club and residential development is located on 536 acres of land

in Dallas County, forty-five miles northwest of downtown Dallas. The site is conveniently

located off Highway 544, just north of the North Dallas Tollway.

The Stonegate golf course was opened in February 1992 and the design of the course has

taken advantage of the beautiful rolling terrain found in this northern part of the city of

Dallas. There are a number of man-made ponds on the course and the architect designed the course to take advantage of the trees and foliage originally found on the property.

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The National Golf Foundation (NGF) in a 1994 study called Golf Consumer Profile found that golfers will travel approximately

12.4 miles or 18.6 minutes one way to get to the course they most frequently play

26.8 miles or 36.3 minutes one way to a good course they would regularly play

48.5 miles or 61.7 minutes one way to get to a good course that they occasionally play.

Golf Participation in the United States the NGF determined that the average Core Golfer (defined as Individuals aged 18 years or older who played at least 8 rounds of golf in 1994) is

45 years old and has a household income of $58,100. The average household income for the Beginning Golfer Population, according to the NGF study, was $52,000. The Core golfer is found to be 5% among those households who have at least $50,000 in household income.

Mr. Smith discovers from his market research for Stonebrook Golf Club that

The total household population within a twelve mile radius is 60,000.

35% of the households within this market area have household incomes

between $50,000 and $95,000.

8% of the households have incomes of $95,000 and greater.

The competitive study shows there is one upscale country club which has an initiation fee of $20,000 and dues of $250 per month. This club is well established and has a waiting list for its membership. The only other golfing alternative is a municipal course which charges $15 every day of the week and is very difficult to get onto.

Mr. Smith of Stonebrook decided to get his message of an affordable high quality golf club delivered to his target market. The objective is to increase the number of membership who are the key to this market. His advertising is likely to cost $100,000 per year, plus salary for a marketing associate of $50,000 per year.

The price for a regular membership is $350 per year and $2000 for the VIP membership. The benefit of regular member is 50% off green tee fee ($60 during weekend) and that of the VIP is free of green tee fee with 8 days advance reservation. The ratio of the two memberships is about 10 to 1. The variable cost per member is $50 for regular and $500 for VIP.

SHOW WORK***

1. How many rounds does a regular member has to play each year (assuming they only play during the weekend) in order to justify the membership fee? (1 points)

2. What kinds of golfer should Stonegate target in this market? (1 points)

3. Based on the above information, can you calculate the market potential of Core Golfer for Stonegate? (1.5 points)

4. What is the weighted contribution margin per member? Both in $ and in %. (1 points)

5. How many new membership needs to be acquired by Stonegate in order to break even? (1.5 points)

6. How about the number of new membership with additional $10,000 in profit for Stonegate? How about another 10% in profit? (2 points)

7. Would you recommend this marketing expense of $100,000 and the hire of marketing associates? Why? (2 points)