The Holiday Hotel provides a recreation center for the use of its guests and employees.
The center also sells memberships to people in the local community. The center has
squash and racket ball court facilities, showering facilities, and a room with various types
of exercise equipment. The courts occupy about 70% of the facility's floor space, the
showering area 10%, the exercise room 15%, and the administrative offices 5%. In the
long-run the hotel could convert unused facilities to additional lodging units. The center
reports the following costs for the most recent year:
1. Assigned building depreciation and staff costs: $400,000. The depreciation charges
amount to $250,000; the salaries of the manager and her staff amount to $ 1 50,000. Staff
costs are independent of the level of activity in the recreation center.
2. Depreciation on the exercise equipment that are added as demand grows: $200,000.
3. Maintenance and electrical charges, which are thought to vary with the number of visitors
to the center: $300,000.
4. Laundry costs: $300,000, comprising $50,000 of depreciation on the machines and
$250,000 of supplies costs.
S. The cost of other supplies, which are consumed equally by all visitors to the center:
$200,000.
During the last year, there were 67,000 visits to the physical center. The capacity level of
each of the showering, exercise, and court areas is estimated as 80,000, 40,000, and
25.000 visits per year respectively.
Required
( 1 ) What is the cost per visit to the physical center?
(2) In the past, the costs of the physical center were charged to the various hotel departments,
guest services, and outside business in the ratio 50%, 40%, and 10%. The idea of