A company owns three motels in a ski resort area. Although there is some business during...
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A company owns three motels in a ski resort area. Although there is some business during the summer months, the company finds it very difficult to staff the three operations during this period and is contemplating clos- ing one of the three motels. The sales revenue and breakdown of costs during this period are as follows: Motel A Motel B Motel C Sales revenue $265,000 $325,000 $425,000 Variable costs 160,000 150,000 135,000 Fixed costs 110,000 167,000 260,000 a. Assuming one of the motels must be closed and that its closing will have no effect on the sales revenue of the other two, explain which motel should be closed and why. b. Would your answer be the same if sales revenue remained the same and the variable and fixed costs changed as follows? A company owns three motels in a ski resort area. Although there is some business during the summer months, the company finds it very difficult to staff the three operations during this period and is contemplating clos- ing one of the three motels. The sales revenue and breakdown of costs during this period are as follows: Motel A Motel B Motel C Sales revenue $265,000 $325,000 $425,000 Variable costs 160,000 150,000 135,000 Fixed costs 110,000 167,000 260,000 a. Assuming one of the motels must be closed and that its closing will have no effect on the sales revenue of the other two, explain which motel should be closed and why. b. Would your answer be the same if sales revenue remained the same and the variable and fixed costs changed as follows?
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a In order to determine which motel should be closed we need to calculate the operating profit for e... View the full answer
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Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
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