Diamond Cruise lines is about to relaunch a cruise ship. Business decisions need to be made in terms of which activities should be located on the main decks of the ship. Currently, Diamond has plans for each floor as follows: 3rd level: This space is only suited for a bar/restaurant. Diamond plans on locating the Nostalgia Bar at this location. 2nd level: This space is only suited for a casino. Diamond plans on locating the Lucky-7 casino at this location. 1st level: This space has limited use, and will be used to sell shore-excursion packages Venue Entertainment has made separate offers to rent the 1st level and 2nd Locations. Diamond can choose to either accept either one or both offers. Other Weekly information is as follows: ActivityLocationSpace required revenues if Diamond operatesVariable Costs if Diamond operates rental income if rented to Venue Sightseeing 1st level5,000 square ft$2,000$1,800$250 Casino2nd level30,000 square ft$100,000$40,000$55,000 Nostalgia Bar3rd level 25,000 square ft$40,000$12,000No rental offer There are $40,000 in weekly fixed costs associated with operating the three locations. 

REQUIRED: Which option should be selected for each location? (2 marks) Allocate the fixed costs to each location. (there are a few possible ways to allocate these fixed costs, and marks for this question are based on your choice of method used to allocate these fixed costs). (5 marks) Identify two qualitative factors that should be considered in deciding if Diamond should rent space to the Venue. (1 mark)

Answer rating: 100% (QA)

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