MA515 Managerial Accounting Report: Analysis of HLW Membership Plans

This report presents a managerial accounting analysis of Hawthorn Leisure Works (HLW), a fitness club offering tennis courts and other services. The analysis focuses on evaluating HLW's current and proposed membership plans, considering factors such as membership fees, facility usage, and revenue generation. The report computes the total annual income under both scenarios, highlighting the impact of different pricing strategies. The current plan charges members separately for services, while the proposed plan integrates fees into an annual membership. The analysis reveals that, although the proposed plan may result in fewer members, it leads to increased total revenue due to integrated pricing. The report concludes with a recommendation for HLW to adopt the proposed membership plan, supported by a detailed discussion of the financial implications. The report uses computations and comparisons to support its findings, and it adheres to the guidelines of the assignment brief.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student:
Name of the University:
Author’s Note:

1MANAGERIAL ACCOUNTING
Table of Contents
Part 1:.........................................................................................................................................2
Introduction:...........................................................................................................................2
Background of the case:.........................................................................................................2
Analysis:.................................................................................................................................2
Conclusion and recommendation:..........................................................................................5
References and bibliography:.................................................................................................6

2MANAGERIAL ACCOUNTING
Part 1:
Introduction:
Managerial accounting is a branch of accounting where all the decision related issues
are addressed. Its scope is not that much wide as financial accounting but it can help in
various key managerial decision making. It analyses various costs and income related issues
in details and can give an optimal solution to the problem. Its effective use can widely be
noticed all over the world (Balakrishnan, Labro & Soderstrom 2014).
Background of the case:
The given case study is such a type of managerial accounting issue. In the given case
study the Hawthorn Leisure Works (HLW) is a fitness club who offers tennis courts and
various other physical fitness services. To join the club, members need to contribute an
annual membership and then for various services various they are charged separately. From
the given data it can be cited that, they classify the members in three classes and the
membership fees structure is also different for each of them. They charge separately for
tennis court facility and the rate is also different based on season and timing.
Analysis:
Based on their current membership plans, fees structures and utilisation of capacity in
peak and off seasons the total annual income can be computed as follows.

3MANAGERIAL ACCOUNTING

4MANAGERIAL ACCOUNTING

5MANAGERIAL ACCOUNTING
It can be observed from the above computation that, in most of the time in the year the
tennis court remains idle hence the income from tennis court is not a significant amount of
their total income. Considering that and to increase the income for the club, the management
proposes a new plan, where the members would be charged annually along with the
membership fees and no other fees will be charged subsequently for using the facilities. They
have also assumed that, the 70 percent of the members will be continuing with the proposed
plan. They have classified the plan in two categories, Family plan and a plan for single
individuals. They have also defined a discount scheme for advance payment of membership
fees. Based on all those proposed fees structure and membership retention, the annual
earnings could be estimated as follows.
It can be observed from the above computation that, they can earn total revenue of
$509,250 in the proposed membership plan structure, which is much higher than their
earnings in present fees structure. It can be observed that, though the number of members
decreased in the proposed plan and there is no other income from facilities, the integrated
annual membership fees have been significantly increased, which can give them a good
amount of revenue. Therefore it can be recommended to HLW to implement the proposed

6MANAGERIAL ACCOUNTING
membership plan. It is because of the split price effect for the facilities, members are having a
marginal annual membership fees and the rest of the income were depending on the
utilisation of the facilities and number of members utilising it. As and when the fees for all
the facilities have been integrated with the annual membership fees, it charges the fees for all
facilities and to all the members of the club irrespective of their use of such facilities (Kaplan
& Atkinson 2015).
Conclusion and recommendation:
From the above discussion it can be concluded that, though the new membership plan
results in a decrease in the number of members, it increases the total revenue because of
integrated pricing or charging fees for all the facilities to all the members. Hence, it can be
recommended to the club to adopt the new proposal.

7MANAGERIAL ACCOUNTING
References and bibliography:
Balakrishnan, R., Labro, E., & Soderstrom, N. S. (2014). Cost structure and sticky
costs. Journal of management accounting research, 26(2), 91-116.
Cooper, R. (2017). Supply chain development for the lean enterprise: interorganizational
cost management. Routledge.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Klychova, G. S., Zakirova, A. R., Zakirov, Z. R., & Valieva, G. R. (2015). Management
aspects of production cost accounting in horse breeding. Asian Social Science, 11(11),
308.