kalamazoo zoo case study question 5

Kalamazoo Zoo

• Budgeting and Finance

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Abstract: Variance analysis is widely used in budgeting and managerial accounting, and is a required skill to be taught in any introductory budget course. The Kalamazoo Zoo is a short, amusing case for use in teaching variance analysis. The case is best taught after students have already learned the basics of variance analysis, using a standard text. [Recommended material is Variance Analysis and Flexible Budgeting, Harvard Business School Publishing, Note 9-101-039, c 2000, and the on-line HBS tutorial on variance analysis]. The Kalamazoo case may be used as a short homework assignment or an in-class group exercise. In the case, students must determine why the Zoo is losing money. Using variance analysis, students can examine the impact of the Zoo's successful animal breeding program (which has produced a higher number of animals) and the quantity of food the animals are consuming. From this simple premise, the case can be used to discuss the revenue and expenditure implications for the Zoo, and to discuss how further variance analysis is necessary to fully understand the drivers of financial performance. The case also allows for a discussion of simple budget options that would enhance revenues and/or decrease expenditures. Learning Objective: Rory Lyons, the director of the Kalamazoo Zoo, must analyze the performance of the zoo in 2009, comparing the actual budget results to the expected budget forecast. The case asks students to perform basic variance analysis on ticket revenues and animal food expenditures, to analyze a number of options for closing the budget shortfall, and to recommend further areas in the budget for investigation.

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Kalamazoo Zoo

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Variance analysis is widely used in budgeting and managerial accounting, and is a required skill to be taught in any introductory budget course. The Kalamazoo Zoo is a short, amusing case for use in…

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• Publication Date: Apr 15, 2015
• Discipline: Accounting
• Product #: KS1126-PDF-ENG

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Variance analysis is widely used in budgeting and managerial accounting, and is a required skill to be taught in any introductory budget course. The Kalamazoo Zoo is a short, amusing case for use in teaching variance analysis. The case is best taught after students have already learned the basics of variance analysis, using a standard text. [Recommended material is "Variance Analysis and Flexible Budgeting," Harvard Business School Publishing, Note 9-101-039, c 2000, and the on-line HBS tutorial on variance analysis]. The Kalamazoo case may be used as a short homework assignment or an in-class group exercise. In the case, students must determine why the Zoo is losing money. Using variance analysis, students can examine the impact of the Zoo's successful animal breeding program (which has produced a higher number of animals) and the quantity of food the animals are consuming. From this simple premise, the case can be used to discuss the revenue and expenditure implications for the Zoo, and to discuss how further variance analysis is necessary to fully understand the drivers of financial performance. The case also allows for a discussion of simple budget options that would enhance revenues and/or decrease expenditures.

Learning Objectives

Rory Lyons, the Director of the Kalamazoo Zoo, must analyze the performance of the zoo in 2009, comparing the actual budget results to the expected budget forecast. The case asks students to perform basic variance analysis on ticket revenues and animal food expenditures, to analyze a number of options for closing the budget shortfall, and to recommend further areas in the budget for investigation.

Apr 15, 2015

Discipline:

Harvard Kennedy School

KS1126-PDF-ENG

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Kalamazoo Zoo Case Analysis and Case Solution

Posted by Peter Williams on Aug-09-2018

Introduction of Kalamazoo Zoo Case Solution

The Kalamazoo Zoo case study is a Harvard Business Review case study, which presents a simulated practical experience to the reader allowing them to learn about real life problems in the business world. The Kalamazoo Zoo case consisted of a central issue to the organization, which had to be identified, analysed and creative solutions had to be drawn to tackle the issue. This paper presents the solved Kalamazoo Zoo case analysis and case solution. The method through which the analysis is done is mentioned, followed by the relevant tools used in finding the solution.

The case solution first identifies the central issue to the Kalamazoo Zoo case study, and the relevant stakeholders affected by this issue. This is known as the problem identification stage. After this, the relevant tools and models are used, which help in the case study analysis and case study solution. The tools used in identifying the solution consist of the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis. The solution consists of recommended strategies to overcome this central issue. It is a good idea to also propose alternative case study solutions, because if the main solution is not found feasible, then the alternative solutions could be implemented. Lastly, a good case study solution also includes an implementation plan for the recommendation strategies. This shows how through a step-by-step procedure as to how the central issue can be resolved.

Problem Identification of Kalamazoo Zoo Case Solution

Harvard Business Review cases involve a central problem that is being faced by the organization and these problems affect a number of stakeholders. In the problem identification stage, the problem faced by Kalamazoo Zoo is identified through reading of the case. This could be mentioned at the start of the reading, the middle or the end. At times in a case analysis, the problem may be clearly evident in the reading of the HBR case. At other times, finding the issue is the job of the person analysing the case. It is also important to understand what stakeholders are affected by the problem and how. The goals of the stakeholders and are the organization are also identified to ensure that the case study analysis are consistent with these.

Analysis of the Kalamazoo Zoo HBR Case Study

The objective of the case should be focused on. This is doing the Kalamazoo Zoo Case Solution. This analysis can be proceeded in a step-by-step procedure to ensure that effective solutions are found.

• In the first step, a growth path of the company can be formulated that lays down its vision, mission and strategic aims. These can usually be developed using the company history is provided in the case. Company history is helpful in a Business Case study as it helps one understand what the scope of the solutions will be for the case study.
• The next step is of understanding the company; its people, their priorities and the overall culture. This can be done by using company history. It can also be done by looking at anecdotal instances of managers or employees that are usually included in an HBR case study description to give the reader a real feel of the situation.
• Lastly, a timeline of the issues and events in the case needs to be made. Arranging events in a timeline allows one to predict the next few events that are likely to take place. It also helps one in developing the case study solutions. The timeline also helps in understanding the continuous challenges that are being faced by the organisation.

SWOT analysis of Kalamazoo Zoo

An important tool that helps in addressing the central issue of the case and coming up with Kalamazoo Zoo HBR case solution is the SWOT analysis.

• The SWOT analysis is a strategic management tool that lists down in the form of a matrix, an organisation's internal strengths and weaknesses, and external opportunities and threats. It helps in the strategic analysis of Kalamazoo Zoo.
• Once this listing has been done, a clearer picture can be developed in regards to how strategies will be formed to address the main problem. For example, strengths will be used as an advantage in solving the issue.

Therefore, the SWOT analysis is a helpful tool in coming up with the Kalamazoo Zoo Case Study answers. One does not need to remain restricted to using the traditional SWOT analysis, but the advanced TOWS matrix or weighted average SWOT analysis can also be used.

Porter Five Forces Analysis for Kalamazoo Zoo

Another helpful tool in finding the case solutions is of Porter's Five Forces analysis. This is also a strategic tool that is used to analyse the competitive environment of the industry in which Kalamazoo Zoo operates in. Analysis of the industry is important as businesses do not work in isolation in real life, but are affected by the business environment of the industry that they operate in. Harvard Business case studies represent real-life situations, and therefore, an analysis of the industry's competitive environment needs to be carried out to come up with more holistic case study solutions. In Porter's Five Forces analysis, the industry is analysed along 5 dimensions.

• These are the threats that the industry faces due to new entrants.
• It includes the threat of substitute products.
• It includes the bargaining power of buyers in the industry.
• It includes the bargaining power of suppliers in an industry.
• Lastly, the overall rivalry or competition within the industry is analysed.

This tool helps one understand the relative powers of the major players in the industry and its overall competitive dynamics. Actionable and practical solutions can then be developed by keeping these factors into perspective.

PESTEL Analysis of Kalamazoo Zoo

Another helpful tool that should be used in finding the case study solutions is the PESTEL analysis. This also looks at the external business environment of the organisation helps in finding case study Analysis to real-life business issues as in HBR cases.

• The PESTEL analysis particularly looks at the macro environmental factors that affect the industry. These are the political, environmental, social, technological, environmental and legal (regulatory) factors affecting the industry.
• Factors within each of these 6 should be listed down, and analysis should be made as to how these affect the organisation under question.
• These factors are also responsible for the future growth and challenges within the industry. Hence, they should be taken into consideration when coming up with the Kalamazoo Zoo case solution.

VRIO Analysis of Kalamazoo Zoo

This is an analysis carried out to know about the internal strengths and capabilities of Kalamazoo Zoo. Under the VRIO analysis, the following steps are carried out:

• The internal resources of Kalamazoo Zoo are listed down.
• Each of these resources are assessed in terms of the value it brings to the organization.
• Each resource is assessed in terms of how rare it is. A rare resource is one that is not commonly used by competitors.
• Each resource is assessed whether it could be imitated by competition easily or not.
• Lastly, each resource is assessed in terms of whether the organization can use it to an advantage or not.

The analysis done on the 4 dimensions; Value, Rareness, Imitability, and Organization. If a resource is high on all of these 4, then it brings long-term competitive advantage. If a resource is high on Value, Rareness, and Imitability, then it brings an unused competitive advantage. If a resource is high on Value and Rareness, then it only brings temporary competitive advantage. If a resource is only valuable, then it’s a competitive parity. If it’s none, then it can be regarded as a competitive disadvantage.

Value Chain Analysis of Kalamazoo Zoo

The Value chain analysis of Kalamazoo Zoo helps in identifying the activities of an organization, and how these add value in terms of cost reduction and differentiation. This tool is used in the case study analysis as follows:

• The firm’s primary and support activities are listed down.
• Identifying the importance of these activities in the cost of the product and the differentiation they produce.
• Lastly, differentiation or cost reduction strategies are to be used for each of these activities to increase the overall value provided by these activities.

Recognizing value creating activities and enhancing the value that they create allow Kalamazoo Zoo to increase its competitive advantage.

BCG Matrix of Kalamazoo Zoo

The BCG Matrix is an important tool in deciding whether an organization should invest or divest in its strategic business units. The matrix involves placing the strategic business units of a business in one of four categories; question marks, stars, dogs and cash cows. The placement in these categories depends on the relative market share of the organization and the market growth of these strategic business units. The steps to be followed in this analysis is as follows:

• Identify the relative market share of each strategic business unit.
• Identify the market growth of each strategic business unit.
• Place these strategic business units in one of four categories. Question Marks are those strategic business units with high market share and low market growth rate. Stars are those strategic business units with high market share and high market growth rate. Cash Cows are those strategic business units with high market share and low market growth rate. Dogs are those strategic business units with low market share and low growth rate.
• Relevant strategies should be implemented for each strategic business unit depending on its position in the matrix.

The strategies identified from the Kalamazoo Zoo BCG matrix and included in the case pdf. These are either to further develop the product, penetrate the market, develop the market, diversification, investing or divesting.

Ansoff Matrix of Kalamazoo Zoo

Ansoff Matrix is an important strategic tool to come up with future strategies for Kalamazoo Zoo in the case solution. It helps decide whether an organization should pursue future expansion in new markets and products or should it focus on existing markets and products.

• The organization can penetrate into existing markets with its existing products. This is known as market penetration strategy.
• The organization can develop new products for the existing market. This is known as product development strategy.
• The organization can enter new markets with its existing products. This is known as market development strategy.
• The organization can enter into new markets with new products. This is known as a diversification strategy.

The choice of strategy depends on the analysis of the previous tools used and the level of risk the organization is willing to take.

Marketing Mix of Kalamazoo Zoo

Kalamazoo Zoo needs to bring out certain responses from the market that it targets. To do so, it will need to use the marketing mix, which serves as a tool in helping bring out responses from the market. The 4 elements of the marketing mix are Product, Price, Place and Promotions. The following steps are required to carry out a marketing mix analysis and include this in the case study analysis.

• Analyse the company’s products and devise strategies to improve the product offering of the company.
• Analyse the company’s price points and devise strategies that could be based on competition, value or cost.
• Analyse the company’s promotion mix. This includes the advertisement, public relations, personal selling, sales promotion, and direct marketing. Strategies will be devised which makes use of a few or all of these elements.
• Analyse the company’s distribution and reach. Strategies can be devised to improve the availability of the company’s products.

Kalamazoo Zoo Blue Ocean Strategy

The strategies devised and included in the Kalamazoo Zoo case memo should have a blue ocean strategy. A blue ocean strategy is a strategy that involves firms seeking uncontested market spaces, which makes the competition of the company irrelevant. It involves coming up with new and unique products or ideas through innovation. This gives the organization a competitive advantage over other firms, unlike a red ocean strategy.

Competitors analysis of Kalamazoo Zoo

The PESTEL analysis discussed previously looked at the macro environmental factors affecting business, but not the microenvironmental factors. One of the microenvironmental factors are competitors, which are addressed by a competitor analysis. The Competitors analysis of Kalamazoo Zoo looks at the direct and indirect competitors within the industry that it operates in.

• This involves a detailed analysis of their actions and how these would affect the future strategies of Kalamazoo Zoo.
• It involves looking at the current market share of the company and its competitors.
• It should compare the marketing mix elements of competitors, their supply chain, human resources, financial strength etc.
• It also should look at the potential opportunities and threats that these competitors pose on the company.

Organisation of the Analysis into Kalamazoo Zoo Case Study Solution

Once various tools have been used to analyse the case, the findings of this analysis need to be incorporated into practical and actionable solutions. These solutions will also be the Kalamazoo Zoo case answers. These are usually in the form of strategies that the organisation can adopt. The following step-by-step procedure can be used to organise the Harvard Business case solution and recommendations:

• The first step of the solution is to come up with a corporate level strategy for the organisation. This part consists of solutions that address issues faced by the organisation on a strategic level. This could include suggestions, changes or recommendations to the company's vision, mission and its strategic objectives. It can include recommendations on how the organisation can work towards achieving these strategic objectives. Furthermore, it needs to be explained how the stated recommendations will help in solving the main issue mentioned in the case and where the company will stand in the future as a result of these.
• The second step of the solution is to come up with a business level strategy. The HBR case studies may present issues faced by a part of the organisation. For example, the issues may be stated for marketing and the role of a marketing manager needs to be assumed. So, recommendations and suggestions need to address the strategy of the marketing department in this case. Therefore, the strategic objectives of this business unit (Marketing) will be laid down in the solutions and recommendations will be made as to how to achieve these objectives. Similar would be the case for any other business unit or department such as human resources, finance, IT etc. The important thing to note here is that the business level strategy needs to be aligned with the overall corporate strategy of the organisation. For example, if one suggests the organisation to focus on differentiation for competitive advantage as a corporate level strategy, then it can't be recommended for the Kalamazoo Zoo Case Study Solution that the business unit should focus on costs.
• The third step is not compulsory but depends from case to case. In some HBR case studies, one may be required to analyse an issue at a department. This issue may be analysed for a manager or employee as well. In these cases, recommendations need to be made for these people. The solution may state that objectives that these people need to achieve and how these objectives would be achieved.

The case study analysis and solution, and Kalamazoo Zoo case answers should be written down in the Kalamazoo Zoo case memo, clearly identifying which part shows what. The Kalamazoo Zoo case should be in a professional format, presenting points clearly that are well understood by the reader.

Alternate solution to the Kalamazoo Zoo HBR case study

It is important to have more than one solution to the case study. This is the alternate solution that would be implemented if the original proposed solution is found infeasible or impossible due to a change in circumstances. The alternate solution for Kalamazoo Zoo is presented in the same way as the original solution, where it consists of a corporate level strategy, business level strategy and other recommendations.

Implementation of Kalamazoo Zoo Case Solution

The case study does not end at just providing recommendations to the issues at hand. One is also required to provide how these recommendations would be implemented. This is shown through a proper implementation framework. A detailed implementation framework helps in distinguishing between an average and an above average case study answer. A good implementation framework shows the proposed plan and how the organisations' resources would be used to achieve the objectives. It also lays down the changes needed to be made as well as the assumptions in the process.

• A proper implementation framework shows that one has clearly understood the case study and the main issue within it.
• It shows that one has been clarified with the HBR fundamentals on the topic.
• It shows that the details provided in the case have been properly analysed.
• It shows that one has developed an ability to prioritise recommendations and how these could be successfully implemented.
• The implementation framework also helps by removing out any recommendations that are not practical or actionable as these could not be implemented. Therefore, the implementation framework ensures that the solution to the Kalamazoo Zoo Harvard case is complete and properly answered.

Recommendations and Action Plan for Kalamazoo Zoo case analysis

For Kalamazoo Zoo, based on the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis, the recommendations and action plan are as follows:

• Kalamazoo Zoo should focus on making use of its strengths identified from the VRIO analysis to make the most of the opportunities identified from the PESTEL.
• Kalamazoo Zoo should enhance the value creating activities within its value chain.
• Kalamazoo Zoo should invest in its stars and cash cows, while getting rid of the dogs identified from the BCG Matrix analysis.
• To achieve its overall corporate and business level objectives, it should make use of the marketing mix tools to obtain desired results from its target market.

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The Kalamazoo Zoo Harvard Case Solution & Analysis

Home >> Harvard Case Study Analysis Solutions >> The Kalamazoo Zoo

The Kalamazoo Zoo

QUESTION 1:

Revenue and expenditure variance on the 2009 Kalamazoo budget based on the information

Provided in Table 1.

QUESTION 2:

Following are revenue quantity variance and Price variance for annual ticket revenue.Using table operating data provided in the table 2.

The variance related to the revenue has two portions; one is related to the variance as a result of the quantity of the visitors budgeted and the quantity of actual visitors, from this variance analysis we can find that how much the company has extra earned from increase in the visitor number or how much the company has less earned from the budgeted figures as a result of decrease in the number of visitors.

 The price used to measurethe variance is budgeted ticket priceasthe actual ticket price may vary from budgeted ticket price and if actual ticket price is used in the variance of quantity, it will not be pure quantity variance as the price variance will also be mixed.

Second portion of the revenue variance is the variance due to the price difference between the budgeted and actual ticket price. The total variance is the multiplication of price variance per ticket and the actual number of visitors.

QUESTION 3:

Following are the expenditure quantity and price variance for animal food expenditures using the data provided in the table 2.

The amount of expenditure on the animal food depends upon the cost of the food provided and the quantity of the animals in the Zoo. If the cost of the animal food becomes expensive the food expenditure will increase and on the other hand the expenditure will also increase with the increase in the number of the animals in the Zoo.

Expenditure variance related to the quantity of the animals in the Zoo only shows the amount of food expenditures increased or decreased due to the difference between the budgeted animal number and the actual number of the animals. The reason behind the increase in the animal number may be due to failure of the Zoo management to maintain the number of animals in accordance to the budgeted number; this may be due to new born animal babies and increase in the purchase of animals at Zoo.

QUESTION 4:

The overall situation of the Zoo is going toward the losses as the expenditures are increasing,with more difference from the budgeted figures on the other hand revenues have been increased from the budgeted figures with small amount of difference as compared to the expenditure of the Zoo. Total expenditure was budgeted as $820,000 and the actual amount of expenditure were $250,000 more than the budget; it was $1,070,000 in the current year.

The increased expenditures of the Zoo are due to the significant increase in the expenditures of animal food, overtime and transportation facilities to the visitors. These expenses were more deviated from the budget figures this shows that the management has failed to budget the expenses properly. Management should take actions to control the expenditures of the zoo especially these three expenses..................

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This case solution includes an Excel file with calculations.

Perform a revenue and expenditure variance on the 2009 Kalamazoo Zoo budget based on the information provided in Table 1.

State whether the revenue variance for Kalamazoo Zoo is favorable or unfavorable. State whether the expenditure variance is favorable or unfavorable. Use template #1 below to guide your analysis

Using the additional operating data on Kalamazoo provided in Table 2, compute revenue quantity variance and price variance for annual ticket revenue and state whether each is favorable or unfavorable.

What do we know about the zoo from doing this analysis?

The Kalamazoo Zoo estimated the number of tickets sold to be 15,000 tickets. However, they actually sold 5,000 fewer tickets than expected. Thus resulting in an unfavorable variance of $40,000.

On the other hand, the zoo sold tickets at a higher price than expected ($10.00 compared to $8.00), possibly because…

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Kalamazoo Zoo Case Porter’s Five Forces Analysis

Home >> Chicago Booth >> Kalamazoo Zoo >> Porters Analysis

Kalamazoo Zoo Case Study Help

Kalamazoo Zoo has obtained a variety of business that assisted it in diversification and development of its item's profile. This is the thorough description of the Porter's model of 5 forces of Kalamazoo Zoo Business, given in Exhibit B.

Competitiveness

Kalamazoo Zoo is one of the leading company in this competitive industry with a number of strong rivals like Unilever, Kraft foods and Group DANONE. Kalamazoo Zoo is running well in this race for last 150 years. The competitors of other business with Kalamazoo Zoo is rather high.

Threat of New Entrants

A variety of barriers are there for the brand-new entrants to occur in the customer food industry. Just a few entrants succeed in this industry as there is a requirement to comprehend the customer requirement which needs time while current competitors are aware and has actually advanced with the customer loyalty over their products with time. There is low hazard of brand-new entrants to Kalamazoo Zoo as it has quite big network of distribution internationally controling with well-reputed image.

Bargaining Power of Suppliers

In the food and drink market, Kalamazoo Zoo owes the biggest share of market needing higher number of supply chains. In response, Kalamazoo Zoo has likewise been concerned for its suppliers as it thinks in long-term relations.

Bargaining Power of Buyers

There is high bargaining power of the buyers due to fantastic competitors. Changing cost is rather low for the consumers as numerous companies sale a variety of similar items. This appears to be a terrific threat for any business. Thus, Kalamazoo Zoo makes certain to keep its customers pleased. This has led Kalamazoo Zoo to be one of the faithful company in eyes of its purchasers.

Threat of Substitutes

There has actually been an excellent risk of replacements as there are alternatives of some of the Nestlé's products such as boiled water and pasteurized milk. There has actually likewise been a claim that a few of its items are not safe to use resulting in the decreased sale. Hence, Kalamazoo Zoo started highlighting the health advantages of its products to cope up with the replacements.

Competitor Analysis

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The Kalamazoo Zoo Case Solution & Answer

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The Kalamazoo Zoo Case Solution 

Based on the overall analysis made, the performance of the zoo has been very disappointing. Most of the budget estimations were not achieved in the actual performance. The revenues are less than estimated, as well as costs are higher than expected. Overall, this is a bad year for the zoo. The breed program was, however, favorable with more new born animals.

There might be two possible reasons for the bad performance;firstly, the weather condition might attract fewer visitors to the zoo than usual as well as the increased inflation might be the reason for the increased prices for food. There might also be a possibility that the budget that was made was unrealistic and did not incorporate many other available information and facts.

Moreover, another element of revenue was donations, as per calculation the donations have unfavorable variance. This should also be considered by the management of the zoo.

Another problem is with the overtime cost. As per the budget and as per the operating cost data given, these costs were not in resemblance, therefore Rory Lyons should investigate in this matter. The information of the workers and the overtime hours worked should be obtained. The rate that is $434 per day is also suspected to be manipulated.

None of the options will help to achieve a break even point. However, as per the analysis based on the actual budget, the best option with least deficit is option 3, which is to fire one of the two assistant zookeepers.

As per option 1 the net impact on the deficit is increment of $80,000 more in the current deficit.

As per option 2 the net impact on the deficit is increment of $60,000 more in the current deficit.

As per option 3 the net impact on the deficit is increment of $46,875 more in the current deficit.

Therefore, option 3 with least increment on deficit is the best option. Moreover, in option 3 there is no data available as per fringe benefits,hence the assumption is taken that the fringe benefit is applicable to 8 employees (2 zoo keepers, 2 animal handlers and 4 other staff members). Thus, these 8 employees would share these benefits in an equal proportion……………….

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