cost concept

It VI: Cost Concept 1. Two entrepreneurs are contemplating purchasing one of two similar competitive hotels and have asked for your advice. Present sales revenue of each motel is $550,000 per year. John's hotel has annual variable costs of 55% of sales revenue and fixed costs of $212,500; Jane's hotel has annual variable costs of 60% of sales revenue and fixed costs of $185,000. The entrepreneurs think that, if they purchased John's hotel, they could save $12,000 a year on interest expense (a fixed cost). Alternatively, if they purchased Jane's hotel, they could improve staff scheduling to the point that the wage saving would reduce total variable cost to 54%. In the case of purchasing either operation, they think that sales revenue can be increased by 25% a year. Calculate the present net income of each hotel with tax rate of 20%. Then, given these assumptions, advise the entrepreneurs which one they should buy, including any cautionary comments if necessary. (5 points) 2. Your client is requesting your assistance in determining a cost equation for forecasting his expenses for his restaurant. He provides costs at two extremes as