Analysis of HLW's New Membership Plan and Fee Structure Proposal

This report analyzes the proposed new membership plan and fee structure for Hawthorn Leisure Works (HLW), focusing on its potential impact on cash receipts and sales revenue. The report begins with an introduction to management accounting and its relevance in evaluating business costs and making financial decisions. The main body assesses the extent to which the new membership structure will improve cash inflows, estimating the effect of the changing fee structure on sales revenue, and identifying key factors HLW needs to consider when deciding whether to adopt the new plan. The analysis includes detailed calculations comparing sales revenue under the old and new fee structures, considering various assumptions about membership conversion and discount schemes. The report concludes that the new plan is likely to significantly improve HLW's cash flow and revenue, emphasizing the importance of considering both financial and non-financial factors in the decision-making process.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
a. Assessing the extent to which new membership plan and fee structure will improve cash
receipts of HLW..........................................................................................................................1
b. Estimating the effect of changing fee structure on sales revenue of HLW.............................2
c. Identifying key factors that HLW needs to consider while taking decision in relation to the
adoption or rejection of new membership plan and fee structure................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Management accounting may be served as a process that provides high level of assistance
in making evaluation of business cost. Tools & techniques of management accounting are highly
significant which in turn assists in evaluating business performance and aid in effective decision
making. Thus, MA tool gives valuable input to the manager and thereby helps in devising
appropriate financial plan. The present report is based on the case situation of Hawthorn Leisure
Works which offers tennis court and fitness facilities to the customers. Given case situation
presents that with the motive to improve cash flow now company is planning to revise fees
structure. In this, report will shed light on the factors that need to be considered while making
evaluation of proposed structure.
MAIN BODY
a. Assessing the extent to which new membership plan and fee structure will improve cash
receipts of HLW
From evaluation, it has identified that new membership structure will make significant
improvement in cash inflows or receipts. Moreover, for attracting several customers or members
HLW is planning to conduct promotional campaign. On the basis of such campaign, club will
offer special reduction or discount to the members on their advance membership fee payment
(Zimmerman and Yahya-Zadeh, 2011). Through such scheme, business entity of club would
become able to generate more receipts. Moreover, customers are encouraged towards purchase
when discounting offers introduced by the firm. Besides this, there will no additional hourly cost
along with annual membership fees which in turn enables individuals and families to play tennis
freely. Further, as per new membership fees structure people who join club in the mid of year
will pay proportional amount. Hence, all such aspects of new membership fees structure will
influence decision making aspect of more people and thereby helps in attaining success.

b. Estimating the effect of changing fee structure on sales revenue of HLW
On the basis of given case situation, for new financial year from 1st October to 30th
September, HLW wishes to introduce new membership and fees structure. On the basis of new
structure, only annual membership fees will be charged by the club rather than additional hourly
court fees. Along with this, for making improvement in inflows HLW has also introduced special
discounts or reduction scheme. Considering specific assumptions evaluation has done such as:
Sales revenue evaluation as per past membership fees structure:
Individual 500 45 22500
Student 500 30 15000
Family 1000 100 100000
Annual
membershi
p fees 137500
;’
Individual 500 45 22500
Student 500 30 15000
Family 1000 100 100000
Annual
membershi
p fees 137500
Particular
s
5pm to 9
pm
9am to
4pm Days Each day
Courts fees
on the basis
of days
During 432 192 181 624 112944

season
During
non-season 144 144 184 288 52992
Total days 265
Total
annual
court fees 165936
Total sales revenue from previous membership fees or plan: $137500 + $165936
= $303436
Computation of sales revenue as per new membership fees structure:
Category
Members
( in
numbers )
Membership
fees ( in $)
Figures
( in $)
Students who converted their membership into
individual (@ revise membership fees) 275 300 82500
Students who have made early payment 225 250 56250
Family (will take benefit of special reduction) 450 450 202500
Individuals 225 250 56250
Family (at new price) 225 500 112500
Total revenue 1400 510000
Interpretation: Tabular presentation depicted above clearly shows that sales revenue will
be $510000 annually if HLW will revise its structure. Further, it has assessed from evaluation
that inflows will improve by approximately 41% or more in the case of new structure as
compared to the previous one. Moreover, sales revenue as per the previous structure accounts for
$303436 respectively. In the case of new membership fees structure, where estimation of only
70% customers have considered, HLW will get approximately $206564 respectively inn against
to the previous structure. Thus, referring all such aspects it is advised to HLW to undertake new
plan which in turn proves to be more beneficial or profitable.
Assumptions:

 Considering given scenario, it is assumed that 70% members will continue their
membership with HLW. On the basis of such aspect, approximately 1400 members of the
club will satisfy with the new structure.
 Along with this, given case entails that 45% member will get special fee reduction on
the basis of promotional campaign. In order to determine members from different groups
individual, student family who will take benefit of special reduction scheme ratio of 2:1:1
or 1:1 has followed. Moreover, as per previous structure members fall into different
categories are:
Individual 1000
Student 500
Family 500
Total club members 2000
Ratio 2:1:1
Now, as per revised membership fees structure students members would convert into
individual membership. In accordance with such aspect, new membership structure will be as
follows:
Individual 1000
Family 1000
Total club members 2000
Ratio 1:1
Thus, considering above ratios, 45% members who make payment of yearly fee in
advance and get reduction are determined. Hence, 450 member of each category will pay annual
fees in advance.
 Further, it is estimated that whole number of students such as 500 who will convert their
membership into individual continue with the club. By taking into account such aspect,

HLW assumed that 275 individual member, who converted their membership, will pay
$300 as annual fees.
 Case situation exhibits that 70% members will continue with the club approximately
1400 by including all the three categories. Out of 1400 members, 900 will make an early
payment to enjoy discounting benefits. Further, from remaining 500, 275 members
accounts for individual category (students). Thus, referring all such aspects 225 family
members are assessed who will pay @$500.
c. Identifying key factors that HLW needs to consider while taking decision in relation to the
adoption or rejection of new membership plan and fee structure
Management team of HLW should make complete and in-depth evaluation of new
membership plan & fees structure before the adoption or rejection of same. Moreover, by
increasing fees business unit cannot make improvement in its cash inflows (Modell, 2010).
Hence, suitable evaluation will present clear picture of financial aspects or inflows in front of the
firm and thereby aid in decision making. The rationale behind this, there is several factors which
in turn closely influences sales revenue and thereby inflows. Thus, main factors or aspects which
manager of HLW needs to consider at the time of taking decision in relation to the selection or
rejection of new plan are enumerated below:
 Higher authority of club should primarily make evaluation of demand level in the
context of new membership fees structure. Moreover, now people are price conscious in
nature and prefer to visit club which offers quality services at suitable fees. Thus,
manager should assess the level to which members are ready to use the services of club as
per new fees structure. The reason behind this, if more members are not happy from the
new structure then it will place direct and negative impact on both sales revenue and
inflow.
 Further, comparison of sales revenue on the basis of new and previous plan should also
be considered by the manager while taking decision (Ward, 2012). The main objective of
HLW behind revising membership fees structure is to improve cash inflows in a positive
manner. Thus, owner of the club needs to assess the level to which inflow will improve
from new fees structure or plan. Thus, financial evaluation will assist to HLW whether it
should undertake new fees structure or reject it.

 Company also needs to make evaluation of the potential candidates who will join club in
the upcoming period or financial year. As per the given scenario, 70% current members
will go with the new structure. However, for getting suitable position or level of inflows
business unit also need to assess number of members who will join club during peak
time. Thus, considering all such aspects HLW can make appropriate estimation of sales
revenue and would become able to take decision that aid in both organizational growth as
well as success.
CONCLUSION
From the above report, it has been concluded that new membership plan and fees
structure will make significant improvement in the cash flows of HLW. It can be seen in the
report that level of sales revenue is higher under new fee structure or plan. Further, it has been
articulated that HLW should consider both monetary and non-monetary factors while making
evaluation of proposed plan. By doing this, firm would become able to take suitable decision that
aid in both organizational productivity and profitability.

REFERENCES
Books and Journals
Modell, S., 2010. Bridging the paradigm divide in management accounting research: The role of
mixed methods approaches. Management Accounting Research. 21(2). pp.124-129.
Ward, K., 2012. Strategic management accounting. Routledge.
Zimmerman, J. L. and Yahya-Zadeh, M., 2011. Accounting for decision making and control.
Issues in Accounting Education. 26(1). pp.258-259.