The Park Hotel's owner is considering closing down the hotel for the period October to March...
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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: Sales Cost of sales Wages and Salaries Telephone Depreciation Light and Heat Cleaning Laundry Advertising Total£18,144 Profit statement 2004/2005 April/Sept. £ 90,000 33,300 56,700 26,000 2,250 3,000 2,200 1,500 1,100 900 36,950 £19,750 Oct/March £ 36,000 14,800 21,200 14,000 1,250 3,000 3,000 667 489 400 22,806 - £1,606 • 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. 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: Sales Cost of sales Wages and Salaries Telephone Depreciation Light and Heat Cleaning Laundry Advertising Total£18,144 Profit statement 2004/2005 April/Sept. £ 90,000 33,300 56,700 26,000 2,250 3,000 2,200 1,500 1,100 900 36,950 £19,750 Oct/March £ 36,000 14,800 21,200 14,000 1,250 3,000 3,000 667 489 400 22,806 - £1,606 • 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.
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Step 12 Relevant Cost In a decision making process only relevant costs are considere... View the full answer
Related Book For
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
7th edition
Authors: Hilton Murray, Herauf Darrell
Posted Date:
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