# Maple Tree Accessory Harvard Case Solution & Analysis

## Maple Tree Accessory Case Study Solution

Whether to shut down the Shop in Short Run

No, Ho shouldn’t shut the shop in the short-run because there is not any incentive for him for doing that, because he already had incurred lot of initial cost and shutting down the shop in the short-run would increase the amount of loss even more. As shutting the shop for one day would cost him RMB 600.

Break-even Sales

In order to achieve the break-even, the Maple Tree Accessory store has to generate sales of RMB 699,216.

 Break-even Sales Per Month Year 1 E Year 2 E RMB RMB Revenue 18,000 216,000 Variable Costs COGS -       129,600 Sales Commission Expense -            6,480 Contribution Margin 79,920 Contribution margin ratio 0.37 Fixed Costs 258,710 Break-even sales 699,216

Should Ho Resume his Part-time Job?

As, If the Ho resumes his part-time job, he will earn RMB 200 per hour and if he does the job for two hours, he will earn RMB 1200 per day, moreover, he will also get some extra time to spend with his family. But in case of handing over the business operation to someone else, he will have to hire a part-time employee and it is most likely that it would cost him less than RMB 200. As, he also needs to give time to his family.
Therefore, it would be good for Ho to resume his part-time job and hire someone for procurement of inventory. This would be the most appropriate decision given the importance of family.

Suggestions for Successful Running of the Business

As Ho has already invested a huge amount of money in the Maple Tree Accessory, any option of closing it would be very costly for Ho. In order to run the business effectively, Ho should adopt following suggestions given the current condition of his business.

• Ho should continue his business by cutting the prices by 20%, because this would increase the overall sales of the shop by 60%.
• Moreover, he should hire a new person for procurement of inventory and continue his part-time software job, because that would provide him ample time to spend with his family and also the opportunity cost of hiring someone else is also less, because he would be earning more in his part-time job.
• In the end, Ho should continue to focus on improving the interior design of the shop, because this would provide an extra edge and more students will prefer to purchase from his shop and the décor of the shop would provide a benefit of students getting attracted to the shop...............

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