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please solve these The Park Hotel's owner is considering closing down the hotel for the period October to March in order to eliminate the loss
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The Park Hotel's owner is considering closing down the hotel for the period October to March in order to eliminate the loss during the winter half. You have been asked to advise him of the financial consequences of closing down for this period. The following additional cost information is provided: Profit statement 2004/2005 April/Sept. Oct/March Sales 90,000 36,000 Cost of sales 33,300 14,800 56,700 21,200 Wages and Salaries Telephone Depreciation Light and Heat Cleaning Laundry Advertising 26,000 2,250 3,000 2,200 1,500 1,100 900 14,000 1.250 3,000 3,000 667 489 400 36,950 22,806 19,750 - 1,606 Total18,144 Wages 2000 is a fixed cost of key personnel who would be kept on the payroll even if the operation were closed for six months. Telephone: 40% of winter values is fixed cost. Depreciation: is a fixed cost. Light and heat: 10% of winter values is fixed cost. Cleaning: variable cost. Laundry: variable cost Advertisement: even if closed, the business will still advertise; this is expected to be 50 per month. Required: if the Park Hotel is closed down for the period of Oct/March revise the statement for the period of Oct/March according to the information given, and provide an explanation of why you would keep the business open or close it for that period Step by Step Solution
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