Case Problem


[Page 726 ( continued )]

V ALLEY S WIM C LUB

The Valley Swim Club has 300 stockholders , each holding one share of stock in the club. A share of club stock allows the shareholder's family to use the club's heated outdoor pool during the summer, upon payment of annual membership dues of $175. The club has not issued any stock in years, and only a few of the existing shares come up for sale each year. The board of directors administers the sale of all stock. When a shareholder wants to sell, he or she turns the stock in to the board, which sells it to the person at the top of the waiting list. For the past few years , the length of the waiting list has remained relatively steady, at approximately 20 names .

However, during the past winter two events occurred that have suddenly increased the demand for shares in the club. The winter was especially severe, and subzero weather and heavy ice storms caused both the town and the county pools to buckle and crack. The problems were not discovered until maintenance crews began to prepare the pools for the summer, and repairs cannot be completed until the fall. Also during the winter, the manager of the local country club had an argument with her board of directors and one night burned down the clubhouse. Although the pool itself was not damaged, the dressing room facilities, showers, and snack bar were destroyed . As a result of these two events, the Valley Swim Club was inundated with applications to purchase shares. The waiting list suddenly grew to 250 people as the summer approached.


[Page 727]

The board of directors of the swim club had refrained from issuing new shares in the past because there never was a very great demand, and the demand that did exist was usually absorbed within a year by stock turnover . In addition, the board has a real concern about overcrowding. It seemed like the present membership was about right, and there were very few complaints about overcrowding, except on holidays such as Memorial Day and the Fourth of July. However, at a recent board meeting, a number of new applicants had attended and asked the board to issue new shares. In addition, a number of current shareholders suggested that this might be an opportunity for the club to raise some capital for needed repairs and to improve some of the existing facilities. This was tempting to the board. Although it had set the share price at $500 in the past, the board could set it at a much higher level now. In addition, an increase in attendance could create a need for more lifeguards.

Before the board of directors could make a decision on whether to sell more shares and, if so, how many, the board members felt they needed more information. Specifically, they would like a forecast of the average number of people (family members , guests, etc.) who might attend the pool each day during the summer, with the current number of shares.

The board of directors has the following daily attendance records for June through August from the previous summer; it thinks the figures would provide accurate estimates for the upcoming summer:

M-139

W-380

F-193

Su-399

T-177

Th-238

T-273

Th-367

Sa-378

M-197

W-161

F-224

W-172

F-359

Su-461

T-273

Th-308

Sa-368

Th-275

Sa-463

M-242

W-213

F-256

Su-541

F-337

Su-578

T-177

Th-303

Sa-391

M-235

Sa-402

M-287

W-245

F-262

Su-400

T-218

Su-487

T-247

Th-390

Sa-447

M-224

W-271

M-198

W-356

F-284

Su-399

T-239

Th-259

T-310

Th-322

Sa-417

M-275

W-274

F-232

W-347

F-419

Su-474

T-241

Th-205

Sa-317

Th-393

Sa-516

M-194

W-190

F-361

Su-369

F-421

Su-478

T-207

Th-243

Sa-411

M-361

Sa-595

M-303

W-215

F-277

Su-419

 

Su-497

T-223

Th-304

Sa-241

M-258

 

M-341

W-315

F-331

Su-384

T-130

 

T-291

Th-258

Sa-407

M-246

W-195

 

Develop a forecasting model to forecast daily demand during the summer.




Introduction to Management Science
Introduction to Management Science (10th Edition)
ISBN: 0136064361
EAN: 2147483647
Year: 2006
Pages: 358

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