Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 35

A group of developers is opening a health club near a new housing development. The health club-which will have exercise and workout equipment, basketball courts, swimming pools, an indoor walking/running track, and tennis courts-is one of the amenities the developers are building to attract new homebuyers. However, they want the health club to at least break even the first year or two. The annual fixed cost for the building, equipment, utilities, staff, and so on is $875,000, and annual variable costs are $200 per member for things like water, towels, laundry, soap, shampoo, and other member services. The membership fee is $225 per month. How many members will the club need to break even If the club doubles its break-even membership after a year, what will its profit be