Space and Light Studios

1. Estimate the current profit figures of SLS from December 2012 to May 2013 to evaluate
the viability of the business.
Data given in the case

Table1. Number of Classes Taken

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13
Group 112 137 113 143 135 155
Private 7 21 15 33 10 18
Salt Cave 0 6 0 1 1 6
Total 119 164 128 177 146 179

Table 2. Number of Client Visit

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13
Group 296 1009 699 998 907 1048
Private 7 21 15 33 10 18
Salt Cave 0 18 0 2 2 12
Total 303 1048 714 1033 919 1078

Table 3. Average Revenue Per Client

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13
Group 10 10 15 15 21 21
Private 130 130 130 130 130 130
Salt Cave 70 70 70 70 70 70
Total 210 210 215 215 221 221

Calculation of Revenue
To calculate the revenues, monthly number of client visits for each class is used since the
average revenue data is provided on per client visit.

Table 4. Total Revenue

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13
Group 2960 10090 10485 14970 19047 22008
Private 910 2730 1950 4290 1300 2340
Salt Cave 0 1260 0 140 140 840
Total 3870 14080 12435 19400 20487 25188
Calculation of Cost

Table 5. Variable Cost

Dec Jan- Feb- Mar- Apr- May-
2012 2013 2013 2013 2013 2013
Salary for teacherss 7140 9840 7680 10620 8760 10740
Salt Cave 0 225 0 37.5 37.5 225
Total 7140 10065 7680 10657.5 8797.5 10965

Table 6. Fixed Cost

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13
Rent 11191 11191 11191 11191 11191 11191
Share facilities 3500 3500 3500 3500 3500 3500
MD software cost 70 70 70 70 70 70
Shuttle bus services 0 0 0 0 700 700
Total 14761 14761 14761 14761 15461 15461

Calculation of Current Profit

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13

Revenue 3870 14080 12435 19400 20487 25188
Less: Variable
cost 7140 10065 7680 10657.5 8797.5 10965
Contribution (3270) 4015 4755 8742.5 11689.5 14223
Less: Fixed cost 14761 14761 14761 14761 15461 15461
Net Profit/ (Loss) (18031) (10746) (10006) (6018.5) (3771.5) (1238)
Table 7. Marginal Statement

Though SLS were not profitable during the 6 months after taking over the business,
however, SLS had an increasing positive contribution and decreasing net losses. Based on
the above result, SLS can be a profitable in near future.
2. Examine SLS’s break-even point for May 2013.
Calculation of Break-Even Point for May 2013
i. Break-Even in Sales (Classes)
¿ Costs
Break−even∈ Sales (Classes )=
Unit Selling Price−Unit Variable Cost

15,461
Break−even∈ Sales (Classes )=
221−97.5

15,461
Break−even∈ Sales (Classes )=
123.5
Break−even∈ Sales (Classes )=125 classes

ii. Break-Even in S$

¿ Costs
Break−even∈ S $=
PV Ratio

Contribution
PV Ratio=
Sales
14,223
PV Ratio= ×100
25,188
PV Ratio=56.47 %
Therefore,
15,461
Break−even∈ S $=
56.47 %
Break−even∈ S $=S $ 27,379.14

Therefore, SLS will covered all its fixed cost and variable cost in May 2013 with the 125 yoga
classes and revenue of S$ 27,379.14.
3. Estimate the profitability of conducting each type of yoga class-i.e. group classes, private
classes, and salt cave classes.
Table 8. Profitability

Group Private Salt Cave

Revenue 22,008 2,340 840
Less: Variable Costs
Teachers' payment 9300 1080 360
Salt cave - - 225
Contribution 12,708 1,260 255
Less: Fixed Costs
Rent 10,026.62 1164.38 -
Share facilities 3030.72 351.96 117.32
MD software cost 70 - -
Shuttle bus services 606.15 70.39 23.46
Net Profit/(Loss) (1,025.49) (326.73) 114.22

Note: The fixed costs are allocated among group, private and salt cave classes as per their
monthly number of classes. For MD software cost, it was all allocated to group class since it
generates more revenue compare to other two classes and also the amount is small. And for
rent, salt cave had to pay different rent for salt stretch class so, it was include in variable
cost.
Number of class
Group Private Salt Cave Total
155 18 6 179

Group Private Salt Cave

Ratio 155/179 18/179 6/179