Accounting

Part III Relevant Costs (20 points) Emma Smith is considering the purchase of a computer for her accounting practice. Two alteratives are being considered as follows: A B Cost $10,000 $12,000 Salvage Value 1,000 2,000 Expected Useful Life 3 years 3 years Utiliteis (annual) 1,000 800 Operator labor (annual) 25,000 25,000 Repairs (annual) 1,000 900 Supplies (annual) 2,000 2,000 Required: 1. Which costs are sunk? (3 points) 2. Which costs are irrelevant? (3 points) 3. Prepare a cost analysis of each alternative. Include only relevant costs. (1 point/each) A B Cost 1)$ 2)$ Salvage Value 3)$ 4)$ (5) $3,000 $2,400 Repairs 6)$ 7)$ Total 3)$ 9) $ 4. What should Paul do? (2 points)Part IV. Pricing (30 points) A proposed hotel, Green & White, is scheduled to open in one year. The business will be organized as a sole proprietorship. The owner, Kim seeks your advice on pricing. Although she knows she will have to modify your recommendations based on market prices, she desires a cost perspective. She gives you the following information: Kim's investment =$5,000,000 Kim's desired ROI =25% Kim's average tax rate =25% Funds borrowed =$4,000,000 Interest rate =10% annual Forecasted annual costs: Fixed charges (other than interest expense and property taxes) =$600,000 Property taxes =$200,000 Management fees =3% of room sales and $100,000 per year Rooms department expenses =10% of room sales and $100,000 per year Undistributed operating expenses =$300,000 Other prot center's activities: Telecommunications =$50,000 annual PM Food and beverage =$10,000 annual log Assume Spartan has 150 guest rooms and it expects to have paid occupancy of 70%. Reguired: 1. Determine the required ADR (20 points) 2. Assume Spartan has three types of rooms as follows: (10 Points) Singles, doubles, and kings. The kings are priced at $20 more than the double and the doubles are 15% higher than the singles. Forty percent of the rooms sold are doubles and 40 % sold are singles, 20% sold are king. What is the average price of a single, a double, and a king