Stretford Boxing

Kiera Lyons is a qualified fitness coach, who prior to the pandemic ran $1-2-1$ fitness sessions with

clients in their homes and a timetable of classes in the local gym. Such included cardio$-$boxercise,

$$High Intensity Interval Training$($HIIT$)$ and $$Spinning$.$ Their business is called $$Fitness World$.$

During the pandemic, they had to diversify their product offering in response to the national

lockdowns and restrictions imposed. As such they began to offer their classes and $1-2-1$ sessions

via conferencing tools such as Zoom. They managed to retain approximately $75\%$ of their clients,

but the remainder they lost to the competition from alternatives such as freely accessible YouTube

channels. Kiera is preparing their cash budget for July, August, September, and October $2024.$

Kiera has provided you with the following information: Monthly membership packages are offered

at $3$ levels:

Package Details Cost

Beginners Introductory classes Monday

$$ Thursday

$15$ per month

Bronze Access to all group classes

Monday to Friday

$25$ per month

Silver Access to all classes Monday $$

Sunday and to an

individualised fitness and

nutritional planner

$30$ per month

Gold All of the above, plus two x $1-$

$2-1$ sessions with Kiera per

week

$40$ per month

Budgeted client numbers for the next four months:

June July August September October

Beginner $70758090100$

Bronze $5255606468$

Silver $3236384448$

Gold $810121416$

$1.$ Kiera offers all their silver and gold customers credit terms of $1$ month, which they all take

advantage of$.$ The payment from bronze and beginner customers is paid in the month in

which it is incurred.

$2.$ Kiera currently works using their old laptop and speakers. They is planning to buy a new

laptop and sound system to enhance the quality of their classes. They intends to buy this in

August $2024.$ At that point they will pay a cash deposit of $750$ with the balance due in

October of $2,250.$

$3.$ Kiera also intends to purchase new fitness equipment in August, including kettle bells, Yoga

mats and step bench. Total cost is estimated at $1250$ which will be paid for in cash at the

time of purchase.

$4.$ In July Keira plans to take out a mobile phone contract for a new iPhone$14$ Pro phone with

an unlimited data. It will cost $50$ upfront and then $56$ a month. The price of the monthly

contract will rise in January by $3\mathrm{.}9\%$

$5.$ Kiera pays for fibre optic broadband to ensure a reliable internet connection for all of their

classes. This is charged at a monthly rate of $30$pcm$,$ payable in the month it is incurred.

However, they has been recently notified that this is likely to see a $8\%$ increase from

September onwards.

$6.$ Earlier in the year, Kiera engaged with a marketing agency to update their company

webpage. The fee for this was $1250.50\%$ was paid in May $2024.$ The balance is due in

August.

$7.$ Kiera employs an administrative assistant to manage their membership records and perform

their bookkeeping. The assistant earns a wage of $1,100$ per month.

$8.$ Kiera takes a wage of $3,000$ per month. Wages are paid in the month in which they are

incurred. From October $2024,$ Kiera intends to award their assistant ONLY a $7\%$ pay rise.

$9.$ Depreciation of all equipment is charged at $40$ per month.

$10.$ Opening cash balance on $1$ July $2024$ is expected to be $7,500.$

$11.$ Kiera continues to pay Personal Trainer Insurance of $15$ per month, payable annually in

advance on $1$ October $2024.$

$12.$ Other expenses, including utility bills relating to the business amount to $250$ per month,

paid for in the month in which they are incurred.

$13.$ In February $2022,$ the company took on a $10,000$ business loan at an annual interest rate of

$6\%.$ The annual interest payment is due in July $2024.$

$14.$ Fitness World is considering purchasing a static fitness gym, as it looks to expand. This would

represent a large capital outlay. No source of funding has been considered for this project.

Requirements:

$($i$)$ Prepare a cash budget for July, August, September and October $2022$ for Fitness

World.

$($Total Marks $20)$

$($ii$)$ Analyse the budgeted figures and changes in the cash balance. In doing so$,$ make any

recommendations to Kiera.

$($Total Marks $15)$

$($iii$)$ What are the internal and external $($environmental$)$ risks to the viability of Fitness

World as a Business? Identify the key issues and advise Kiera on what they are.

$($Total Marks $10)$

$($iv$)$ Fitness World has had the same pricing strategy now for several years. Kiera is

wondering if this is the right one for her target market. What alternative pricing

strategies could be used?

$($Total Marks $10$