Parking as an optional feature of the membership

Reference no: EM13145900

Tom and Lynda, owners of Hercules, are considering whether to offer valet parking as an optional feature of membership. They estimate that offering the service would increase monthly costs by $2,500 for salaries paid to attendants, increase in insurance rates, and so on. They also estimate that 400 members would use the service if it were priced at $5 per month. At this price, the club would also attract 20 new members. The number using the service would be 300 and the number of new members would be 10 if the valet parking were priced at $10 per month. You estimate membership fess at $100 per month and variable costs at $35 per month.

a. At what price, if at all, should Tom and Lynda offer valet parking as an optional feature of the membership? Justify with supporting calculations.

b. What other factors might Tom and Lynda consider in their decision?

Reference no: EM13145900

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