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Hurricane Island Outward Bound School Case Solution & Answer

Hurricane Island Outward Bound School Case Solution

Thus, the school even cannot meet with the breakeven point. On the other hand, the School is unable to utilize its full capacity either during theseason or in out of season. Because, as of the financial projections of 1986, the school is underutilizing its student’s capacity and the student program capacity as well. Meanwhile, it can be determined that school is in the deficit from 1981 to date. Since it also concluded that average cost of SPD has increased by 15%.

Furthermore, Maine Sea program is the widely known program among the students, since this program successfully attracts the students, youths from universities, and colleges. However, the number of enrolments in 1984 was 1208 students, but in 1985 it decreased to 1120 approximately by -7%. Furthermore, Maine Sea program is a much economical as compared to the other programs that school if offering the company.

Meanwhile, the There are five categories of the programs, However, amongst those categories, the least losing making categories are Maine Sea and special programs. See Exhibit 1, and figure 1 that shows how different categories are generating net income per SBD. On the other hand, remaining other categories are incurring losses instead of profit.Since the cost of caring programs exceeds the revenues generated by the programs. So, if the company focus on specific course of the program them it is also possible that it might lose the sales in coming years, and the situation can also become worst.

Conclusion and Recommendation

The Hurricane has been under the major operational deficits since the school has also been using marketing tools like presentation, direct mail, and by using the alumni of the school to promote the courses, and boost sales. Indeed, the School has granted 10% budget for the marketing purpose. Furthermore, the reason is that the cost of programs is increasing by 15% yearly. But, it is hard for the company toincrease the prices of the course that might result in the decline of sales made by the company.

Since the direct cost of per SPD is $45 and fixed overhead $30 per SPD. Furthermore, the Maine Sea program has large course enrolments in the school. But, it is also in deficit by approximately $6 per SPD. However, it is the second lowest deficit in the programs after special programs that has adeficit of $3 approximately. Furthermore, it is also identified that School is underutilizing the capacity of the enrollments, and capacity of the students. However, the enrollments in the Maine Sea is also declining by the 7%.

Therefore, it is recommended for the School that it should initiate the large-scale marketing campaign in the market that could increase the sales of the school. Furthermore, it should focus on the being cost effective. Meanwhile, it should focus on the generating net income or it should breakeven at least. However, it can be possible for the school. When, school boost the sales, and utilize the full capacity so that it can benefit from the economies of scale. Since capacity underutilization has increased the operational deficit.

On the other hand, the school should increase the prices of the programs not significantly; then it would be able to breakeven. Meanwhile, the increased capacity utilization would increase the revenues due to the economies of scale.Since it is also recommended for the school that it should discontinue a course that has alack of students and for safety reasons as well. But, it cannot abandon a course on which school is incurring aloss. Therefore, School should focus on The Maine Sea courses that represented the history and has most enrollments but also declining as well.

Appendices

Exhibit 1 Financial Performance 1986 by Program Projected
Revenues Direct Cost Fixed Overhead Total Cost Surplus/Deficit by SPB
Maine Sea Program  $            927,015  $            612,405  $              408,270  $                     1,020,675  $ (6.88)
Florida Sea  $            189,800  $            113,760  $                75,840  $                        189,600 $ 0.08
Summer Land  $            874,600  $            619,335  $              412,890  $                     1,032,225  $ (11.45)
Winter land  $              82,400  $              58,680  $                39,120  $                           97,800  $ (11.81)
Managers  $            191,800  $              62,460  $                41,640  $                        104,100  $ 63.18
Other  $            795,800  $            642,465  $              428,310  $                     1,070,775  $ (19.26)
Total  $        3,061,415  $        2,109,105  $          1,406,070  $                     3,515,175

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