To :Coast4life Inc
From: Pat Brown, CMA
Subject: Options for Cost savings and revenue generation
Coast4life Inc with the expected downturn situation due to recent terrorist attack on a cruise ship in 2012 and on airline industry would prepare to remain profitable by finding ways to cut cost or generate additional revenue. Target is to recommend the best among the four alternative as directed and aiming at 16% after tax return and tax rate of 38%.
Identification of Issues and related alternatives:
• Debt to Equity Ratio of 1.23 more than 1 reveals that more than half of assets are financed by debt.
• $3.6 million required for ...view middle of the document...
Loss of 15% more spending by them(Refer Appendix 3)
• % of passengers 40 to 60 years old is only 30% as compared to 38%in industry standard(Refer Appendix 3)
• Revenue per passenger is only $288 as compared to industrial standard of $314(Refer Appendix 3)
• Also the mix variance compared to industry gives a unfavorable balance of $78,278.40(Appendix 3)
Alternative 3: Registering Coast4life in Liberia
• Low wages by 30 %( Refer appendix 4)
• Concerns on service quality levels because of unskilled workers.
• Potential public relations.
• Training required for unskilled workers to meet Coast4 life standards.
Alternative 4: Web-Based booking
• Savings on commissions to agents by 10%
• Advantages for customers to book online
• Helps in maintaining database for Customer behavior
• Incremental cash flow of 11 million in 2013 id web based booking increases (Appendix 5)
• Setup cost and software $50000 and accounting module of $25000.
• Maintenance of the web server
• Training cost required for staffs to get hands on Accounting Software
• To continue to maintain the Fraser dry dock as it has not generated a positive Cash flow. There is growth opportunities in Vancouver.
• Implement the web based system and avoid...