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 corresponding to the school holidays. The following budgets have been prepared for the next summer season:

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 £15500 Sports Shop Estimated contribution £1 per person per day.

Fixed costs £8250 Cafeten'a 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.

You are required to

(a) calculate the charges for single and double rooms assuming that the authority wishes to make a £1 0 000 profit on accommodation; (6 marks)

(b) calculate the anticipated total profit for the leisure centre as a whole for the season; (1 0 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