Problem 5The La Lague Hotel has the following costs at two sales levels:Monthly Room SalesRooms 20003000Payroll:Salaries$15,000$15,000FixedVariableFixed$15,000Wages40,00060,000Variable$20 per roomEmployee benefits9,20010,700Mixed$1.5 per room$6,200Supplies2,0003,000Variable$1 per roomUtilities8,0008,000Fixed$8,000Other operating costs4,0005,000Mixed$1 per room$2,000Building rent8,0008,000Fixed$8,000Interest expense2,0002,000Fixed$2,000Insurance3,0003,000Fixed$3,000Total$23.5 perroom$44,200Required:1)Identify each cost as fixed, variable, or mixed. 2)What are the total estimated monthly fixed costs? 3)What are the total estimated variable costs per room sold?4)Develop a single equation to estimate the total costs at various levels of activity. Page 4 of 7
Problem 6A fine dining restaurant is considering replacing its current dishwasher with a new energyefficient model. Although the current one has a present book value of $1,000, its currentmarket value is $2,000 and, if held for five more years, this would drop to $300. If themanager decides to keep the current one, approximately $500 of repairs must be performed.The following is a schedule of expected annual expenses for each option over the next fiveyears:Keep CurrentBuy NewMaintenance$400$200Labor12,00012,000Energy800500Water400400The new machine would cost $7,000 and is expected to have a salvage value of $2,000 at theend of five years.Required:1)
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- Spring '20