Case Teaching Package
A case teaching package is available for this case. It includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into your course.

Length
This case is 4 pages in length and its case teaching package is 8 pages.

Abstract

This case study is set in 1962 in rural Vermont. The Majestic Lodge is an old, but well-maintained property that has changed ownership several times over the years. It has no restaurant or bar. It is positioned as a mid-price, good quality "destination" resort lodge.

This case is an excellent exercise in incremental cost analysis for a business, which is very familiar to students. There is high common sense validity for the use of fixed/variable cost analysis and break-even logic for a ski lodge considering staying open in the off-season. The case works well fairly early into an MBA-level managerial accounting course. It is also an excellent exam case with a two-hour time limit.

Linkages to Textbooks or Journal Articles/Fit Within a Course

The case is now 30 years old, but there is no particular reason to update the numbers. Used as is, the case still teaches very well and also includes a little "history lesson" on cost levels from the early 1960s.

We teach the case in one 90-minute class period. It will easily support that level of discussion. Even though the calculations are straightforward, the management judgments are controversial. It is important to keep things moving along in order to save time at the end for discussing the decision. But, if things move quickly, the decision will support up to 25 to 30 minutes, particularly if time is devoted to question 7—suggestions for changes in management policies.

Study Questions

1. List all the relevant decision alternatives in Mr. Kacheck's proposal.
2. For each alternative from question 2, list the annual expenses that are incremental to that decision alternative but are not related to the room/days occupied.
3. What is the incremental contribution margin per occupied room/day during the off-season?
4. For each decision alternative calculate the occupancy rate necessary to break even on the incremental annual expenses.
5. What alternative do you recommend? Why?
6. Evaluate the profitability of the Lodge as an investment for its owners. Does this affect your answer to question 5?
7. Do you have any other recommendations for the owners?

The downloadable file for this case is in Microsoft® Word 7.0 for Windows®.

If you do not have Microsoft Word, you can download the free Microsoft® Word Viewer 97 right here:   For Windows 3.x   For Windows 95

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