A local authority owns and controls a multipurpose leisure/conference hall with adjacent bars and restaurants, in a seaside holiday resort. The authority has received requests for the letting of the hall from

(1) the organizers of an international Modern and Latin American dance championship, and

(2) a firm of exhibition organizers which wants to mount an exhibition of hotel and catering equipment.

The estimates of income and costs are shown below.

Dance championship Dates hall required: Monday 16th May to Saturday 21st May, 19_8, inclusive.

Income: £200 per day rent plus 25% of box office takings from visitors who pay £5 entry fee per day to watch the championships. From past experience of running this event, the organizers estimate the number of dance competitors, who do not pay at the box office, will be 1 200 (200 per day) and that there will be 14 000 paying visitors over the six days.

30 stalls can be let to traders who use the concourse adjoining the hall.

The traders sell dance shoes, clothes, records, and videos. Stall rents vary with size but if all are occupied, the rental income received by the authority for the whole period of six days will be £5 000.

Some events are to be filmed for showing on television at a later date for which the authority will receive a fee of £3 000.

Bars and restaurants can expect to take £3 per person per day for each person using the hall.

Hotel and catering equipment exhibition 400 stand units can be erected and dates required are Sunday 15th May to Wednesday 18th May, 19_8, inclusive. Sunday is the preparation day for the businesses renting stands for the exhibition from the organizers. The exhibition is to be open to the trade and public on the Monday, Tuesday and Wednesday. Stands are dismantled during Wednesday evening.
The exhibition organizers believe that all the stands will be let although some exhibitors will take two or more units to constitute larger stands.
Exhibitors’ employees average two per stand unit per day with exception of the preparation day (Sunday) when the average is six per stand unit.
Although open to the public, the exhibition is primarily for the trade, i.e.
for buyers of hotel and catering equipment, which is what prompted the organizers to select a holiday resort. The exhibition organizers are offering £8 000 rent for the four-day period plus 20% of receipts from visitors. It is expected that 4 600 visitors will each pay £2.50 to enter the exhibition over the three-day period.
It is estimated that all the exhibitors’ employees will spend £6 each per day in the bars and restaurants and that each visitor to the exhibition will spend an average of £2.
Authority employees, some of whom are temporary part-time, staffing the hall, bars and restaurants are listed below. Box office staff are engaged on other duties within the hall when it is not open to the public. Assume that the weekly payments are variable with the days the hall is in use and are based on a 6-day working week.

A gross profit of 45% is expected from all bar and restaurant receipts; the gross profit represents sales less cost of food, beverages and drinks.
Ignore inflation and value added tax.

Required:

(a) prepare a comparative statement showing the income and expenditure relating to letting the hall for (1) the dance championship, and (2) the exhibition; (12 marks)

(b) calculate the average surplus contribution per day of use for each proposal; ~~ (2 marks)

(c) recommend to the authority which proposal should be accepted, together with two reasons supporting your choice; (5 marks)

(d) list three factors which the authority should consider—these may not necessarily be of a financial nature.

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Managers Box office staff Attendants/security staff Restaurant and bar staff Restaurant and bar staff Variable costs: Energy costs Cleaning contractors Number required for duty Dance championship Weekly wage 300 200 150 20 200 10 22 120 100 9 Exhibition 26260 200 300 } per day the hall is in use Employee-related costs are 10% of total variable staff costs. Fixed costs are expected to be incurred as follows: Manager and support staff permanently on site Electrical, lighting and maintenance staff Depreciation on fittings and equipment Insurance Per annum 60 000 100 000 80 000 20 000