Part A - 12 Marks

Janice Long is considering building a budget hotel that offers clean small rooms with bathrooms. She anticipates that her 120 rooms will rent for 39,600 room-nights per year. The market price for equivalent rooms is $60 per night. Janice estimates that the capital cost will be $6,500,000 and she would like an annual return of 10%. Following are the estimated annual operating costs:

Variable operating costs $ 21 per room night

Fixed costs:

Salaries and wages $ 420,000

Building maintenance 89,000

General administration 280,000

Total fixed costs $ 789,000

Required:

a. What is the full cost per room-night?

b. Can Janice meet the targeted return on investment based on the estimated costs and revenue? Show your calculations.

c. A tour operator has offered $30 per night for 20 rooms during a time of the year that there is likely to be at least that many rooms vacant. Should Janice accept this offer? Show your calculations.

Part B - 6 Marks

The schedule below is the sales budget for five months ending September 2024

Month	Month Cash Sales	Credit Sales
May 2024	$16,000	$68,000
June 2024	20,000	80,000
July 2024	18,000	74,000
August 2024	24,000	92,000
September 2024	22,000	76,000

Additional Information includes.

• Collections are 40% in the month of sale.
• 45% in the month following the sale, and 10% two months following the sale.
• The remaining 5% is expected to be uncollectible.

Required: Make a schedule of cash collections for July through September.