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Tju [1.3M]
3 years ago
14

Exercise 19-13 Variable cost analysis for a special order LO A1 Grand Garden is a luxury hotel with 160 suites. Its regular suit

e rate is $210 per night per suite. The hotel’s cost per night is $135 per suite and consists of the following. Variable direct labor and materials cost $ 36 Fixed cost [($5,770,000/160 suites) ÷ 365 days] 99 Total cost per night per suite $ 135 The hotel manager received an offer to hold the local Bikers’ Club annual meeting at the hotel in March, which is the hotel’s low season with an occupancy rate of under 55%. The Bikers’ Club would reserve 45 suites for three nights if the hotel could offer a 55% discount, or a rate of $94 per night. The hotel manager is inclined to reject the offer because the cost per suite per night is $135. Required: Prepare an analysis of this offer for the hotel manager.
Business
1 answer:
zysi [14]3 years ago
8 0

Answer:

If the special offer earns a positive contribution margin, we should accept the special order.

Explanation:

Given that,

No. of suites in luxury hotel = 160

Regular suite rate = $210 per night per suite

Hotel’s cost per night = $135 per suite

Variable direct labor and materials cost = $36

Fixed cost = 99

Total cost per night per suite = $135

Contribution margin per night per suite:

= Room rate per night - Variable cost per night

= $94 - $36

= $58

Contribution margin from special offer:

= Contribution margin per night per suite × Number of nights × Number of suits

= $58 × 3 × 45

= $7,830

Management should accept the special offer.

When the company receives offer, the hotel is running at low season. occupancy rate is 55%

If the special offer earns a positive contribution margin, we should accept the special order.

Room rate is $94 for special order.

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John and Sally Claussen are considering the purchase of a hardware store from John Duggan. The Claussens anticipate that the sto
Marina CMI [18]

Answer:

Explanation:

Calculate maximum that should pay:

Compute present value of cash flows from the store, year 1 to 5 :

Annual cash flows are $70,000

Desired rate of return on investment for 1 to 5 years is 7%

Number of years is 5

Present value of cash flows generated during 1 to 5 years =

= $287,013.82

Compute present value of cash flows from the store for years 6 to 10

Annual cash flows are $70,000

Desired rate of return on investment for 6 to 10 years is 10%

Desired rate of return on investment for 1 to 5 years is 7%

Number of years is 5

Present value of cash flows generated during 6 to 10 years = annual cash flows x PVIFA (10%,5) x PVIF (7%,5)

= $70,000 x 3.79079 x 0.7130 = $189,198.33

Compute present value of cash flows from the store for years 11 o 20

Annual cash flows are $70,000

Desired rate of return on investment for 11 to 20 years is 12%

Desired rate of return on investment for 6 to 10 years is 10%

Desired rate of return on investment for 1 to 5 years is 7%

Number of years is 10

Present value of cash flows generated during 11 to 20 years = [annual cash flows x PVIFA (12%,10)] x PVIF (10%,5) x PVIF (7%,5)

= $70,000 x 5.65022 x 0.62092 x 0.7130  = $175,100.98

Calculate present value of estimated sale amount to be received for sale of store

Present value of estimted sale amount to be received = [Estimated sale amount x PVIF (12%,10)] x PVIF (10%,5) x PVIF (7%,5)

=$400,000 x 0.32197 x 0.62092 x 0.7130=

=$57,016.50

Calculate total maximum amount that should be paid

Particulars Amount ($)

Present value of cash flows during 1 to 5 years         $287,013.82

Present value of cash flows during 6 to 10 years $189,198.33

Present value of cash flows during 11 to 20 years $175,100.98

Present value of estimated sale value                  $57,016.50

Maximum amount that C should pay to JD for store $708,329.63

Therefore, Maximum amount that should be paid $708,329.63

4 0
3 years ago
Devon invested $10,500 in three different mutual funds. A fund containing large cap stocks made a 6.7% return in 1 yr. A real es
madreJ [45]

Answer:

Amount invested in a fund containing large cap stocks = $6,000

Amount invested in a real estate fund = $1,500

Amount invested in a bond fund = $3,000

Explanation:

Let:

x = Amount invested in a fund containing large cap stocks = 4 * y = 4y

y = Amount invested in a real estate fund

z = Amount invested in a bond fund =

For total amount invested, we have:

T = total amount invested = x + y + z = $10,500

Therefore, we have:

4y + y + z = $10,500

5y + z = $10,500 ……………………….. (1)

From equation (1), we have:

z = 10,500 - 5y …………………….(2)

Also, for the net returns, we have:

6.7%x - 15.6%y + 4.9%z = $315

0.067(4y) - 0.156y + 0.049z = 315

0.268y - 0.156y + 0.049z = 315

0.112y + 0.049z = 315 ………………… (3)

Substitute equation (2) for z in equation (3), we have:

0.112y + 0.049(10,500 - 5y) = 315

0.112y + 514.50 - 0.245y = 315

0.112y - 0.245y = 315 - 514.50

-0.133y = -199.50

y = -199.5 / -0.133

y = 1,500

x = 4y = 4 * 1,500 = 6,000

From equation (2), we have:

z = 10,500 - 5y = 10,500 - (5 * 1,500) = 3,000

Therefore, we have:

Amount invested in a fund containing large cap stocks = $6,000

Amount invested in a real estate fund = $1,500

Amount invested in a bond fund = $3,000

Checking this, we have:

Total amount invested = $6,000 + $1,500 + $3,000 = $10,500

8 0
3 years ago
Mack writes a check to his maid, Marianne, in payment for services rendered. Marianne indorses the check in blank and gives the
Vilka [71]

Answer:

Mack, Marianne, and Martin

Explanation:

Based on the information provided within the question it can be said that in this scenario if the bank dishonors the check St. Mark can look for recovery from Mack, Marianne, and Martin. This is due to the fact that they all endorsed the check. This is because by endorsing the check you are signing the back of it which means that you are making it payable to someone else, and if the check is not accepted you are taking responsibility for paying that person. Which Mack, Marianne, and Martin all endorsed the check.

5 0
3 years ago
A property consists of 8 office suites, 3 on the first floor and 5 on the second floor. The contract rents are as follows: 2 sui
tangare [24]

Answer:

$89,100

Explanation:

Let us first calculate annual gross rent for Year 1:

Total rent per month:

= 2 suites at $1,800 + 1 suites at $3,600 + 5 suites at $1,560

= $3,600 + $3,600 + $7,800

= $15,000

Annual gross rent = Total rent per month × 12

                              = $15,000 × 12

                              = $180,000

Effective gross revenue = Potential gross rent revenue - Vacancy and connection losses (10% of potential gross rent)

                                        = $180,000 - $18,000

                                        = $162,000

Net operating income = Effective gross revenue - Operating expenses including depreciation

                                      = $162,000 - $72,900

                                      = $89,100

6 0
4 years ago
Morales Company sells $320,000 of its receivables to Instant Factors, Inc. Instant Factors assesses a finance charge of 3% of th
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Answer:

Dr Cash $310,400

Dr Factoring expense$9,600

Cr Account receivable $320,000

Explanation:

Preparation of the journal entry to record the sale of the receivables on Morales Company's books.

Dr Cash $310,400

($320,000-$9,600)

Dr Factoring expense$9,600

($320,000*3%)

Cr Account receivable $320,000

(Being to record the sale of the receivables on Morales Company's books

7 0
3 years ago
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