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Sea Pines Racquet Club maintains 5 tennis courts on its property. Sea Pines is considering using some or all of the available courts to
Sea Pines Racquet Club maintains 5 tennis courts on its property. Sea Pines is considering using some or all of the available courts to provide tennis lessons for its guests, who would pay for lessons on a per-hour basis. The lessons would be provided by tennis professionals, who would need to be hired. Each tennis court could provide up to 700 court-hrs of capacity per quarter for tennis lessons. Likewise, the capacity of each tennis pro hired would be 700 court-hrs per quarter. (I do not mean to introduce any complication here: a tennis pro's capacity corresponds to a tennis court's capacity. So, if Sea Pines hires a tennis pro, that tennis pro gets matched with a tennis court, and, together, the tennis court and tennis pro become available for up to 700 court- hrs of tennis lessons per quarter.) Demand for tennis lessons is seasonal; so is the market price that Sea Pines is able to charge. Sea Pines has the capability of making remarkably accurate forecasts of demand for lessons (in courthrs). Those forecasts and the corresponding market price of lessons for the next two years follow: Year Quarter Demand (court-hrs) Price (per court-hr) 1 1 3850 $52.00 234 2 1950 $48.00 1000 $56.00 2560 $68.00 2 1 4000 $76.00 2 2000 $68.00 3 1250 $68.00 3000 $88.00 Tennis pros are hired for 2-year terms. Any pro hired would be paid $8,000 per month in year 1 and $8,400 per month in year 2. The gross profit on a sale of a tennis lesson (not including the salary of hired tennis pros) is 65% of the price. (This is because there is a 35% variable cost associated with selling a tennis lesson. I don't know why - maybe there is extra maintenance/upkeep costs for a court used for lessons, maybe customers get free bottled water, maybe customers get a 10-minute backrub for each hour of lesson - I don't know. But, let's pretend, okay?) How many, if any, tennis pros should Sea Pines hire?
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