Question 3

Health 4 All centre specialises in the provision of sports/exercise and medical/dietary advice to clients. The service is provided on a residential basis and clients stay for whatever number of days that suits their needs. Budgeted estimates for the year ending 30 June 2022 are as follows:

1. The maximum capacity of the centre is 50 clients per day for 350 days in the year.

2. Clients will be invoiced at a fee per day. The budgeted occupancy level will vary with the client fee level per day and is estimated at different percentages of maximum capacity as follows:

Client fee per day	Occupancy level	Occupancy as percentage of maximum capacity
N$ 180	High	90%
N$ 200	Medium	75%
N$220	Low	6%

3. Variable costs are also estimated at one of the three levels per client per day. The high, most likely and low levels per client days are N$95, N$85 and N$70 respectively. The range of cost levels reflects only the possible effect of the purchase prices of goods and services.

Required:

3.1 Prepare a summary which shows the budgeted contribution earned for the year ended 30 June 2022 for each of the nine possible outcomes (high, most likely, low). 10 marks

3.2 State the client fee strategy for the year to 30 June 2022 that will result from the use of each of the following decision rules:

(i) Maximax

(ii) Maximin

(iii) Minimax regret

Your answer should explain the basis of operation of each rule. Use the information from your answer above (3.1) as reference and show any additional working calculations as necessary (10 marks)