Question 1 (CVP Analysis)

SummaFun (SF) is a sports and leisure centre situated in Dorset. It offers residential accommodation, a cafeteria, an outdoor swimming pool and a sports centre which caters for a number of different sporting activities. SF is currently in the process of preparing its budget for the summer season of 2019. The season lasts for 20 weeks, including a peak period of six weeks during the summer holidays. The following budgets have been prepared for the 2019 season:

Accommodation

80 single rooms let on a daily basis at 30 per room

45 double rooms let on a daily basis at 160% of the single room rate, i.e. 48 per room

Fixed costs for the season = 40,000

Variable costs = 6 per single room per day, and 9.60 per double room per day.

SF is open for 7 days a week throughout the season.

It is expected that double rooms will be 100% full throughout the season, while single rooms will be fully booked during the peak period, but will be at just 75% of full capacity for the rest of the season.

Further information (Required for profit calculations in the three areas mentioned below)

The budget assumes one guest per single room per day and two guests per double room per day.

Apart from guests staying in the accommodation, 40 casual visitors per day (on average) are expected during the season.

Sports Centre

Residential guests pay 2.50 per day and casual visitors pay 3.50 per day for the use of the facilities. History has shown that both residents and casual visitors use the sports centre on a daily basis throughout the season.

Fixed costs for the season = 25,000

Variable costs = 0.50 per person per day

Cafeteria

Estimated contribution per person per day = 2.00 per day. (It is assumed that all residents and visitors visit the cafeteria daily, on average).

Fixed costs = 15,000

Swimming Pool

Residents pay 1.00 per day, whereas visitors pay 1.50 per day.

History has shown that during the peak period, 80% of all visitors and residents use the pool on a daily basis.

During the rest of the season, 70% of visitors and 60% of residents use the pool on a daily basis.

Fixed costs for the season = 5,000

Required:

1. Calculate the total budgeted profit for SummaFun for the 2019 season.

2. Calculate the daily rates for single rooms and double rooms if double rooms are charged at 160% of the single room rate, and SF wishes to make a budgeted profit of 462,320 on accommodation for the season. (All other information and costs relating to accommodation remain the same).