Advanced: CVP analysis based on capacity usage in a leisure centre A local government authority owns and operates a leisure centre with numerous sporting facilities, residential accommodation, a cafeteria and a sports shop. The summer season lasts for 20 weeks including a peak period of 6 weeks corre¬ sponding to the school holidays. The following budgets have been prepared for the next summer season:

You are required to

(a) calculate the charges for single and double rooms assuming that the authority wishes to make a £10000 profit on accommodation;
(6 marks)

(b) calculate the anticipated total profit for the leisure centre as a whole for the season;
(10 marks)

(c) advise the authority whether an offer of £250000 from a private leisure company to operate the centre for five years is worthwhile, assuming that the authority uses a 10% cost of capital and operations continue as outlined above.LO1

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Accommodation 60 single rooms let on a daily basis. 35 double rooms let on a daily basis at 160% of the single room rate. Fixed costs 29 900 Variable costs 4 per single room per day and 6.40 per double room per day. Sports Centre Residential guests each pay 2 per day and casual visitors 3 per day for the use of facilities. Fixed costs 15 500 Sports Shop Estimated contribution 1 per person per day. Fixed costs 8250 Cafeteria Estimated contribution 1.50 per person per day. Fixed costs 12750 During the summer season the centre is open 7 days a week and the following activity levels are anticipated: Double rooms fully booked for the whole season. Single rooms fully booked for the peak period but at only 80% of capacity during the rest of the season. 30 casual visitors per day on average.