Question

QUESTION 3 (10 marks) SHORT ESSAY How would management accounting be useful to a gym? Explain your answer giving appropriate examples. Explain the concept 'value chain’. Why is the concept of value chain important to an organization and how might an organization make use of this concept to its benefit? Note : Your essay should not exceed 1 page.

Answer 1

Management accounting is useful to a gym in the following ways.

1. It helps to plan prices strategically - Make projections for the revenue of the gym to set up realistic prices.

Ex: Monthly unlimited plans may be appropriate for a large gym with more members but may not go well for a smaller one.

2. It helps to streamline sales - Buying of a gym membership should be easy irrespective of whether it is sold on the website or front desk.

Ex: Use the right gym software to help manage the gym's contracts, sales and finances.

3. It encourages to give incentives to top staff members - The team should be motivated with referral programs and incentives.

Ex: Bonuses to staff

4. Space and energy use should be maximized - Make investments to reduce cost.

Ex: Invest in efficient lighting like LED lights to reduce utility costs.

5. Diversify products and services - The gym should try to sell diversified products and services.

Ex: Selling energy drinks, supplements or clothing with the gym's name and logo.

6. Use of quality gym management software - Invest in softwares that atre best suited for a gym.

Ex: Wodify core is a very good software for gyms.

Value chain

Value chain is a business model that describes the activities that are needed to create a product or service. For manufacturing companies, value chain involves bringing a product from conception to dsitribution such as procuring raw materials, manufacturing functions and marketing activities.

Importance of value chain

Value chain helps increase production efficiency so a company can deliver maximum value at least cost.

Companies can create efficiency by analysing the value chain activities and hence gain a competitive edge and thereby boost profits.

It improves bids and proposals.

It helps in better product planning, research and development.

It helps in standardising products.