Financial Implications of Various Scenarios in Antonbach Ski Lodge – Case Study Example
The paper "Financial Implications of Various Scenarios in Antonbach Ski Lodge" is a worthy example of a case study on finance and accounting. Currently, Antonbach Ski Lodge prides itself as a mid-sized mountain village that offers moderately priced, good quality destinations. It operates mostly during the skiing peak season running from early December through to late March. We were required to analyze various scenarios and provide suggestions concerning the noted financial implications. Cost denotes the value of money used in any economic activity. In the case of Antonbach Ski Lodge, we analyzed the information provided and found the total fixed cost to be $ 755,848.64 while the total variable cost is $ 115,973.36. Fixed costs are incurred regardless of the opening of the lodge. They include, but not limited to labor costs, office expenses and insurance. Variable costs, on the other hand, are incurred when the lodge is open and includes guest amenities. (Exhibit 1) Contribution margin is the balance of revenue after taking care of all variable costs. The total contribution margin for the east wing rooms is $134.51/room while that of the west wing rooms is $184.51/room. The east wing rooms are more profitable as compared to the west wing rooms. We find the weighted average contribution margin of east wing to be $80.84051 while that of the west wing is $73.61949. (Panel B) The target units to be 9,101.7 rooms (Panel C). More specifically, in the east wing, we obtained a target of 30.26 rooms/day while in the west wing it is 45.58 rooms/day. The main implication of this is that daily revenue is going to increase by $4,255. In terms of costs, the variable costs are going to increase. Panel D represents our in-depth analysis of this scenario. We obtained an increase in total revenue to $77,255 while the fixed cost will increase by $60,000. The figure of the marketing cost is a fixed cost as it is independent of the occupancy levels. It is going to be incurred in the current financial period only. This is a feasible plan as the increase in total revenue is more than the increase in cost. Since the revenue per room is going to change while the total cost per room remains constant, the contribution margin is going to change It is worth noting that the total revenue will increase by $21,423.6 and the total net income by $16,423.6 (Panel E) We find this to be a viable idea in the end as the increase in the revenue and net income is more than the reduction in cost per room. From the analysis, we found the plan is going to yield an operating loss of $8,152 (Exhibit 2). This is caused majorly by the increase in the operating expenses. Opening the resort more days will result in incurring more variable cost (Exhibit 1). It is also worth noting that the labor costs are increasing as the employees are working more than is the current situation.