During a seminar on understanding and managing business costs the guest speaker argued that there is...
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During a seminar on understanding and managing business costs the guest speaker argued that there is no cost which is purely fixed or variable. He further argued that costs can be classified based on function or on the basis of the purpose for which they are incurred. Elaborate clearly this statement. (3 Marks) b) Hillcrest hotel makes and sells a single meal called "Delicious'. Its currently operating at 80% capacity due to the effects of Corona virus producing 112,000 plates of the meal per month. The total monthly costs at the current level of operation is $611,000. At 100% capacity, total monthly costs would be S685,000. Additional information: 1. At the normal selling price of the meal the contribution to sales ratio is 60%. 2. A new customer (a company intending to hold a meeting at the hotel) has offered to buy 25,000 plates of the meal each month at 20% below the normal selling price. 3. Hill Crest Hotel estimates that for every five plates that it will sell to this customer, it will lose one plate of the meal of its current monthly sales to its competitors. Required: (i) Determine the variable cost per plate of the meal and the total fixed costs per month 4 Marks) (ii) The current sales price and contribution per unit at this (3marks) price (iii) The break-even point in units (Plates of the meal) and in dollars ($) (2 Marks) (iv) Advice the management of the hotel on whether the offer for the new customer be accepted should (3 Marks) During a seminar on understanding and managing business costs the guest speaker argued that there is no cost which is purely fixed or variable. He further argued that costs can be classified based on function or on the basis of the purpose for which they are incurred. Elaborate clearly this statement. (3 Marks) b) Hillcrest hotel makes and sells a single meal called "Delicious'. Its currently operating at 80% capacity due to the effects of Corona virus producing 112,000 plates of the meal per month. The total monthly costs at the current level of operation is $611,000. At 100% capacity, total monthly costs would be S685,000. Additional information: 1. At the normal selling price of the meal the contribution to sales ratio is 60%. 2. A new customer (a company intending to hold a meeting at the hotel) has offered to buy 25,000 plates of the meal each month at 20% below the normal selling price. 3. Hill Crest Hotel estimates that for every five plates that it will sell to this customer, it will lose one plate of the meal of its current monthly sales to its competitors. Required: (i) Determine the variable cost per plate of the meal and the total fixed costs per month 4 Marks) (ii) The current sales price and contribution per unit at this (3marks) price (iii) The break-even point in units (Plates of the meal) and in dollars ($) (2 Marks) (iv) Advice the management of the hotel on whether the offer for the new customer be accepted should (3 Marks)
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Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
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