Dream Land Resort Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Dream Land Resort Case Study Solution

Variable and Fixed Cost:

Cost:

Cost is defined as the monetary amount which is incurred by the company in manufacturing or delivering a product or services. Mainly the cost of a product or service is the combination of variable cost and fixed cost.

Variable Cost:

Variable cost is the part of the total cost which fluctuates with the product or services of the company, meaning when a company increases its production or services then the variable cost will increase too and vice versa.

In the case of Dreamland resort weekly cost incurred by the resort over per guest such as cost of food (25), electricity for heating and cooking (3), domestic expenses (5) and use of minibus expense (10) will be considered as the variable cost because this cost will vary with the number of guests visiting the resort.

variable cost

Fixed Cost:

Fixed cost is another component of the total cost which does not fluctuate with the increase or decrease in the production or services of the company this cost remains same throughout the period.

In the case of Dreamland resort annually cost incurred by the resort such as 4000 rent and rates of the property and 1000 nominal charges for the maintenance of the holiday resort will be considered as the fixed cost because these are absolute cost which cannot be neglected by the resort or which does not depend over the production or services of the resort.

The remaining cost such as 11000 cost of seasonal staff supervised will be considered as asemi-fixed cost because this cost will be increased by 200 if the number of guest per week exceed the threshold of 10.

fixed cost

Breakeven Point:

The breakeven point is defined as the point at which there will be no gain and losses, in other words, we can say that it is the point at which revenues and expenses become the same. It is resulted by dividing the total fixed cost by the contribution and contribution is defined as the difference between selling price and the variable cost.

The Dreamland resort charge 100 per guest per week, however, the variable cost which is incurred over the visit of per guest per week is 43, hence, from this we can conclude that the company earns a contribution of 53 per quest per week and 1710 per guest per 30 weeks. Along with this, the total fixed cost of the company is approximately 19885 for 30-weeks. Hence, by dividing fixed cost with the contribution, we will conclude that the breakeven point of Dream Land resort is approximately 12 guest. In this calculation, we treat all semi-fixed cost as the fixed cost.......................