Mountain Horn Hostel was purchased by a naturalist who hopes to show people the value of wildlife and also to provide them with a pleasant vacation retreat. Costs are budgeted for the year and will be allocated over the 120 days of the tourist season. The hostel has a normal volume of 100 persons per day. Using the cost information, the owner hopes to develop a billing rate per person per day that will yield an acceptable profit.

Costs for the year were estimated as follows:

A friend of the naturalist offers advice: “Your idea of normal volume is full capacity. What about rainy days and cancellations? You'll be lucky to have 80 people a day. And if snow comes early, count on a 100-day season. That’s my idea of normal.”

Required:
1. Compute a cost per person per day using the naturalist’s concept of normal.

2. Compute a cost per person per day using the friend’s figures.
3. Explain the difference in the results of the two computations.

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Kitchen and dining room costs Housekeeping costs Taxes and insurance Repairs and maintenance Utilities. Grounds and pool maintenance Salaries of drivers and guides Operating costs-buses and vans Depreciation-buses and vans Depreciation-buildings Total estimated cost $172,000 68,000 18,000 21,000 37,000 11,000 54,000 9,000 18,000 12,000 $420,000