Paper Example: Space & Lights Studios (SLS)

One essential aspect for companies in the current world as well as businesses is how to establish the brand. A brand defines a business position and helps a business stand out despite the presence of other competitors. Businesses and companies are, therefore, highly recommended to be flexible enough to meet customer needs dynamics. Most individuals are being attracted to yoga activities recently. As a result, Space and Light Studios situated in Singapore has adopted the trend by opening yoga studios with a unique taste. To improve the brand, SLS company offer unique Yoga class to attract more customers. The paper aims at identifying the key strengths and profitability aspects of yoga.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Question 1: Estimate the current profit figures of SLS from December 2012 to May 2013 to evaluate the viability of the business.

Through the case study analysis, it can be observed that the Space & Lights Studio profit margin is continually growing every month. The total estimate for every fiscal year is over $25,188. To calculate the current SLS estimated profit, the total cost of the sold goods is subtracted from the total revenue (Yamada & Yamamoto, 2019). Despite the value obtained being negative, it doesn’t mean the company makes losses. The company gained a net profit of $18,048.50. However, the net profit next year dropped to -$1,210.50.

Question 2: Examine SLS’s break-even point for May 2013.

Break-even is used to refer to the total revenue amount needed for covering variable and fixed expenses accompanying incurs within a given period. The knowledge of the break-even point plays an essential role in determining the degree to which a manager makes decisions. Critical decisions such as future profits, sales, and pricing can be based on the break-even aspect. The break-even point is obtained by dividing the fixed cost of the business by the vital contribution margin. In the case provided, the total fixed price for the SLS company is $15,478.50; the corresponding contribution margin is $14. Therefore, the net break-even point is estimated to be $1, 105.60.

Question 3: Estimate the profitability of conducting each type of yoga class – i.e. group classes, private classes, and “salt cave” classes.

There is a high variation in attendance predictability across different classes being offered by SLS. More people attend group classes as compared to other forms of classes such as private and salt “cave” classes. Due to some classes attracting fewer customers, the profit margins tend to lower (Curtis et al. 2020). To obtain per-class profitability, each class cost is subtracted from the total revenue collected. The total revenue collected from group classes is $22,008; on the other hand, the class cost experienced is $9,300, which results in a net profit of $12,708. A total of $2,340 was collected from private classes and a cost of $1,080, which reflects $1,260. Finally, the salt “cave” classes had a total value of $360 and total revenue of $840, resulting in a $480 profit.

Question 4: Consider the implications of the analyses above for SLS.

By observing closely on the analytical information obtained by analyzing different profit levels from different classes, it can be argued that only group classes have the highest profit margin. Private and salt “cave” classes are costing the studio a lot. The two classes with the least profit pull a lot of money from the studio. For the case of salt class, at least $140, was removed in 2013 since the attendance was only two people (Jastrzebski et al. 2020). If other related costs are to be accounted for, it means that the total cost incurred by the company exceeds over $140. It is therefore advisable for SLS company to drop salt cave classes since it is not beneficial to the company.

Question 5: Conduct sensitivity analyses based on different scenarios of rental costs, fees paid to yoga teachers, and pricing.

The importance of sensitivity analysis is to determine how a given dependent variable is affected by a given set of values of an independent variable under certain assumptions set. Sensitivity analysis is mostly referred to as simulation analysis answering “what-if” questions. It is useful for predicting a decision outcome through a given variable range. In the SLS case study provided, there is a vast number of what-ifs (Putri et al. 2019). currently, SLS experiences high rent fee, by considering a case where they can find an alternative rental place between $500-$1000, the company can potentially save at least $6000-$12,000 every fiscal year (Mostovyi & Sîrbu, 2019). SLS company can also consider the pricing tags for the classes; a small increase in the current price has a high potential of creating a vast difference.

Question 6: Recommend a plan of action for the owners of SLS.

From the case provided, it can be concluded that SLS is continuously becoming popular over time, as depicted by the current company’s profit margin. By evaluating the sensitivity analysis cases, changing the current pricing method can be beneficial in raising the company’s profit margins. Since group classes have the highest profitability, it will be more essential to consider increasing the class price. An enormous difference can be established by applying a small cost which in return benefit SLS company since more income will be generated.

References

Curtis, A., McVay, S., & Toynbee, S. (2020). The changing implications of research and development expenditures for future profitability. Review of Accounting Studies, 1-33. https://link.springer.com/content/pdf/10.1007/s11142-019-09528-6.pdf

Jastrzebski, S., Szymczak, M., Fort, S., Arpit, D., Tabor, J., Cho, K., & Geras, K. (2020). The Break-Even Point on Optimization Trajectories of Deep Neural Networks. arXiv preprint arXiv:2002.09572. https://arxiv.org/abs/2002.09572

Mostovyi, O., & Sîrbu, M. (2019). Sensitivity analysis of the utility maximization problem with respect to model perturbations. Finance and Stochastics, 23(3), 595-640. https://link.springer.com/article/10.1007/s00780-019-00388-1

Putri, R. N. A., Rahardjo, M., & Gravitiani, E. (2019). Ecopreneurship Production Costs and Break-even Point Analysis of Ecopreneur in Sragen, Indonesia. Academy of Entrepreneurship Journal. https://www.abacademies.org/articles/ecopreneurship-production-costs-and-breakeven-point-analysis-of-ecopreneur-in-sragen-indonesia-7821.html

Yamada, T., & Yamamoto, K. (2019). Second-Order Discretization of Bismut--Elworthy--Li Formula: Application to Sensitivity Analysis. SIAM/ASA Journal on Uncertainty Quantification, 7(1), 143-173. https://epubs.siam.org/doi/abs/10.1137/17M1142399