Please answer with written format not with excel calculations

UVERWEW Viper Kai Fitness Incorporated {YEP} is a general tness studio operator and tness equipment manufacturer that was founded in 1934 by Jack (Jackie) Iawrence.1he studio provides an extensive range of tness training equipment, personal training1 and group activities lhe company operates l fitness studios across California, including one agship location 1n Los ngeles l'he company also manufactures a line of Viper Kai tness equipment that includes treadmills stationary bikes ellipticals and stairdimbers. l'hese are sold at the 1f! studios online small tness stores and through mass merchandisers induding Wal-Mart. jackie has hired your team of consultants to help with some operational and strategic decisions the company is facing. PART a (3 Marks} Jackie believes that the studio has been successful for over 3i] years because of its highly trained staff, strong cost control in operations, body-positive and inclusive philosophy, and commitment to controlling membership numbers to avoid congestion While that has led to lower overall members than some competing gyms, this has also resulted in significantly lower member turnover than the industry average, reducing customer acquisition costs. hiembers have several options for payment including biaweekly payments of willJ monthly payments ofl EU, or an annual membership fee of$l,3[lll. The gym operates 48 weeks a year, with two weeks off during the winter holidays, one in summer, and one in the fall1 often for cleaning and maintenance purposes. t the start of the scal year next month, jackie is integrating mixed martial arts classes into the studio. using 1 lm square feet that has nev er been utilized (this will be referred to as the \"martial arts gym \":i l'he classes will he offered over a twelve- week period [called a session} with four sessions naniung consecutively every year Classeswillbe two hours longeach once aueekandwillbescheduledas following; The expected registration per session is III- participants {participants only attend one class per week for 12 consecutive weeks]. The studio only has the capacity to hold a maximum of twenty participants at a time. Members would pay an additional $250 to participate in the 12-week sessions with no refunds offered for missed classes. Members who register will also receive as part of the session a 1|v'iper Kai uniform (costing u} and a martial arts belt {costing $10} whidi are supplied \"free of charge" by VICE Sparring gloves (costing 521]} can be purchased separately by members which are sold by 'v'Kl-i at cost. For every session.ll even if it is a repeat customer. the}.r receive the uniform and belt. The studio is not expected to have any impact on membership registration trends. The current monthly rent for the ljl square fmt flagship studio- is $4 per square foot. The operation of the martial arts classes is estimated to increase utility costs by Sltllt and sanitation costs by $500 for each 12. week session {inclusive of all nine class times]. Insurance covenage will also have to be extended due to increased liabilityr for iniuries From martial arts, resulting in a $4,E'I{Il total raise in insurance per 12-week session fmclusive of all classes}. Promotional costs specically for the martial arts gym are amicipated to be a mix of radio, newspaper, online. and or advertisements that will cost $30,111!) arurually. Jackie had plarmed on paying instructors 52m per hour but a rival studio, hyagi Doio, is hiring instnrctors for 51:11 per hour. jackie Fears that Shit will not be a competitive rate. An instructor will be [resent for the Full 2 hours For each of the 9 time slots held each week Fixed head ofce overhead of $3,tl has been allocated to each 12-week session. Q1} Identify at least two irreleymt costs, prioes, or o'ter information in your analysis. h-Iake sure to explain why they are irrdevant to your analysis. {ILS marks] Q2} 1What is the contribution margin per member and relevant xed costs for the martial arts studio? [115 marina} Q3} What registration per session is required for the martial arts studio to breakeverLi' {0.5 marks} Q4} What is the armual prot for the martial arts snrdio based on the forecasted registration? {0.5 marks} Q5} Assuming a constant corporate tax rate of 2tli'fu, what average registration per session is required For the martial arts studio to hit an incremental annual net prot of 54JHHJ, which is desired byjackie? [0.5 marks} Q6} Based on ymir analysis from questions 1 to 5, how would you evaluate the potential of the martial arts studio? lEonsider at lease one qualitative factor in your analysis and eatplain how sensitivity analysis could work For some of the variables. $0.5 marks} Part B {4 marks} Jackie also wants your help analyzing the equipment division of the company. The division currently produoes Four product lines; treadmills, stationary bikes, ellipticals, and stairclimbers. The treadmill is the main product produced and sold by VICE, generating more than half it's revmue. The sales 3.: marketing team Focuses on promoting treadmills and, to a lesser tl'lt, stationary bikes, because they are at higher price points. 'lhe lower- priced Elliptical and Stairclimber product litres are currently unprotable, andjackie is considering dropping them completely. Important information for each product on a. per unit basis is in the table below: m M m_ son on lbs 152 no lbs ton Hillbs 12o so lbs amour-mam om units 'lhe non-electronic components of the mess equipment are welded, assembled, and nished in a small production facility with 4 direct labourers who can work up to 40 hours a week for 5i! weeks a year. The composite material required for treadmills averages 52.91:} per pound and $1.25 per pound for stationary bikes. Ellipticals anti stairclimbers use cheaper material that is half the cost on a per pound basis of the material used to build treadmills. VHF only has the ability to purchase "HIM!!! lbs of total material armually for production in the fatality. Furthermore, VHF is not able to t more that 4 workers at a time into the Facility and ladrs the capital or desire to expand the facility oor space. Workers are contracted on an hourly basis which provides exibility and reduces underutilized hours. 'l'readmills are bulkier and have more moving parts, so they require an average of direct labour hours to build each unit. Elliptical and stairrlimbers have less components and only require an average of 1 direct labour hour ead'l per unit Stationary bikes require two hours of direct labour per unit. The electronic components of the tness equipment [mainly the motors or resistance mechanisms) are produced using specialized equipment within the facility. The design and mechanisms of the motor are similar across the four products, so the same machine can be utilized to manufacture the electronic components for all four products. The average per unit cost of materials for the electronic component is $15 for treadmills, $100 for stationary hikes, $15 For ellipticals and 5T5 for stairdiinhers. Furthermore, one treadmill requires 3.5 machine hours for the electronic component, stationary bilres require 2 machine hours per unit, ellipticals 1.?5 machine hours per unit1 and stairdirnhers L25 machine hours per unit. The current production utilizes the Full practical capacity available for the specialized equipment in terms ofmachine hours. The facility is rented wid- a xed lease that is inclusive ofutilities. Variable overhead costs For the production of electronic equipment are negligible._]ackie has identied total xed costs For the entire equipment division of $1.375 million with $25,000 of d'tose xed costs oocurring regardless of the level of production or if product lines are dropped. 1n the current production plan, $225,tlt}fl of the $T25, has been allocated to the treadmill product line, $2ilfL t:l:.|'stationarr bikes, HELLER) to ellipticals, and $1 SILIIIHJ to the staircliinber product line. The methodology for this cost allocation is unclear. lEflrut of the remaining tted costs, 35% can be attributable to treadmills, 2.11% to stationary bikes, 25% to stairclimbers, and 20% to elliptical-t. If a product line is dropped, these attributable xed costs can be saved. The sales team has estimated the following limits on demand (in, the maximum demand) for each product line for the next annual period: Maximum demand 1 tt 1,25 Linn Direct labourers earn $25 per hour in the production facility. The salaries for the sales team and supervisors have been included in the xed costs and are at eatcept for a 5% commission on all sales that is received by the sales team for every unit sold. This sales oommission is not included in xed costs. Q7} Calculate the contribution margin per unit for each product [1 mark} QB} Develq} a contribution margin format income statement for the 53% production plan, separated by product lines [1 mark) {29} Based on your analysis From question T and B, shouldjachie drop the elliptical and stairclimber product lines based on the W? Please leain. [11.5 marks} Q10} Determine the emit! production plan For the equipment division. Should an].r divisions be dropped? What qualitative factors need to be consideredwhen dropping a division{s}? Please explain. [1 mark) Q11] Develop a contribution margin format income statement for the oprn production plan, separated by product lines. How is the sales team impacted by the optimal production plan? {05 marine}