Old 500 repairs 300 scrap dd in 5 years New 7000 price 2000 scrap 2000 scrap

# Old 500 repairs 300 scrap dd in 5 years new 7000

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Old: 500 repairs 300 scrap (dd in 5 years) New: \$7,000 price 2,000 scrap \$2,000 scrap (old) 5f1be44466f948ac2a50c4d89c94a558d4723159.docx Page 4 of 7 now 5 years later
Keep BUY Repair 500 Scrap in 5 years 300 Maintenance 2,000(\$400 x 5 years) 1,000 (\$2,000 x 5years) Energy \$4,000 (\$800 x 5 years) 2,500. (\$500 x 5years ) Buy Purchase 7,000 Scrap in 5 years 2,000 Scrap (old) 2,000 TOTAL 6,200 6,500 We keep the old one, is cheaper with 300 than buying a new one. 5f1be44466f948ac2a50c4d89c94a558d4723159.docx Page 5 of 7
Problem 7 Starlight hotel desires to purchase a new front office computer system. After considerable researches, the manager has narrowed his choices to systems sold by ABC Ltd. and XZY Ltd. The system proposed by each company is expected to have a useful life of 7 years. The manager believes the alternative systems are equivalent for providing services required by the hotel; therefore, his focus is cost. The associated costs of each system are as follows: ABC XZY Initial cost \$25,000 \$30,000 Annual costs: Labor 25,000 25,000 Utilities 1,000 800 Supplies 2,000 2,000 Maintenance 3,000 2,500 Salvage value (when?) 5,000 8,000 Required: 1) Which costs are irrelevant? 2) Which system should the hotel purchase? Ignore the time value of money. Show workings. Problem 8 The Edelweiss Hotel has the following accumulated records of the total electricity costs and the number of rooms sold over the last year. Rooms Sold Electricity Cost January 2,604 \$6,257 February 2,856 6,550 March 3,534 7,986 April 1,440 4,022 May 540 2,315 June 1,116 3,591 July 3,162 7,264 August 3,608 8,111 September 1,260 3,707 October 580 2,289 November 1,080 3,321 December 2,046 5,196 5f1be44466f948ac2a50c4d89c94a558d4723159.docx Page 6 of 7
Required: 1) Using the high-low method, estimate the fixed and variable components of the electricity cost (keep two decimals). Variable cost: \$ 8,111 \$ 2,315 \$ 3,608 \$ 540 = \$ 5,796 \$ 3,068 = 1,89 \$room sold Fixed cost: \$1,89 × \$3,608 = \$ 6,819.12 \$ 8,111- \$ 6,819.12= \$ 1,291.88 y= 1,89x + 1,291.88 2) Develop a cost formula and estimate the electricity cost if 2,900 rooms were sold. y= 1,89 ¿ X+ 1,291.88 y= 1,89 × 2,900 rooms + 1,291.88 y= \$6,772.88 5f1be44466f948ac2a50c4d89c94a558d4723159.docx Page 7 of 7

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• Fall '15
• NoriPearson
• Hopedale Inn, La Lague Hotel