It's May 2006 and your team report is being prepared from the perspective of Helen Roswell, Administrator, at the Westmount Retirement Residence. Write the report as if you are Helen and are preparing the report yourself. Helen is preparing the report is to develop a costing analysis and make recommendations on a new pricing system for Westmount's services that will result in the required 15% overall profit margin on the resident fees (see page 5 Moving Forward). The report is being prepared for Westmount's owners so you can assume the readers will be familiar with the background and business operations of Westmount. Do not repeat information from the case unless it is relevant to support the written discussion. The report is to follow the required course case report format and include all sections. See the specific requirements for certain sections below: Analysis 1. The basic financial information from the case is provided in the Excel case attachment on Blackboard. Accept all the costs as given in the Excel file and base your analysis on the provided annual costs. Use the Excel file information provided. a. Ignore inflation and do not consider cost savings or other potential efficiencies for the purpose of preparing this case. 2. Comment and discuss Westmount's return on Resident Revenues - i.e. compare resident revenues with expenses. 3. What are the key issues or deficiencies with the existing Cost-plus Pricing methodology that need to be addressed? Discuss your findings in the report. 4. Ignore Helen's comment on Page 5: "It's reasonable, I think, to assume that 50 percent of the total facility cost should be applied to all residents regardless of care needs or room size, with the other 50 per cent of the total cost applied on the basis of suite size or square footage." 5. Helen and her team quickly identify the rising patient care costs as a strategic long-term business sustainability concern, the costs are uncontrolled and the activities lead to higher support costs in the administration and other units. Helen has decided that the new pricing will include a proposal to offer only a low level of patient care included in the base rate going forward. Discuss the repercussions of eliminating the medium and high levels of care on both Westmount's costs and future pricing. 6. Discuss high-level alternative Cost-Plus pricing models - what is the billable service (or bundle of services) under each option and how would costs be allocated and charged. 7. Allocation of costs for each alternative. Use a two-step approach. a. First, allocate the indirect department costs. b. This first step should be common for all alternatives. Complete Schedule A (First Step Allocation in Excel file) and include in the Appendices. c. Leave the second step or full cost allocation to billable services for the Evaluation section and do the allocation only for viable alternatives. Business Case 1 Instructions Case 1 Group Report Instructions 2021.Docx ACCT 4520 Page 2 of 3 8. Transition - discuss a realistic roll-out or transition in terms of fairness and impact on current residents to avoid price shock on individuals or couples with fixed incomes and medical support needs. Impact Analysis 1. Discuss the risks and potential long-term outcomes of changing or not changing the pricing methodology on each key stakeholder group. Discuss each stakeholder group separately. Evaluation of Alternatives 1. The first alternative is the "Do Nothing" option of keeping the existing Costing and Pricing methodology as described in the case. You should consider one or two different Cost-Plus alternatives so you can perform the evaluation against your chosen criteria. 2. Clearly define and explain each alternative Cost-Plus model. What services or bundle of services will be charged to residents and what are the applicable cost drivers (allocation base) are for the various charges? 3. How is the final price or rate for each service derived? Is the pricing clear and transparent so it can be explained to the existing and future residents? 4. Develop a table of Pros and Cons for the alternatives identified (example below). Alternative Pros Cons Existing Costing and Pricing ... ... Alternatives 1, 2 ... 5. Final Pricing a. Compare the derived services and rates with Westmount's existing rates and their local competitors' rates. (Include the full schedule in the Appendices). b. Prepare a proof that the alternative billing pricing will generate the required profit margin on resident fees. 6. Include a brief summary of the evaluation leading into the Recommendations section.