kong operates a boutique hotel in a resort area near Chenang, Langkawi. Depreciation on the hotel is 60,000 per year. kong employs a maintenance person at an annual salary of 41,000 and a cleaning person at an annual salary of 24,000. Real estate taxes are 10,000 per year. The rooms rent at an average price of 60 per person per night. Other costs are laundry and cleaning service at a cost of 10 per person per night and the cost of breakfast which is 5 per person per night. Required: (a) Indicate the number of rentals and the sales revenue kong needs to break even using the contribution margin technique. (b) If the current level of rentals is 4,000, by what percentage can rentals decrease before kong has to worry about having a net loss? (c) kong is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional 3 food costs per person per night. kongfeels she can increase the room rate to 68 per person per night. Indicate the number of rentals and the sales revenue kong needs to break even if the changes are

kong operates a boutique hotel in a resort area near Chenang, Langkawi. Depreciation on the hotel is 60,000 per year. kong employs a maintenance person at an annual salary of 41,000 and a cleaning person at an annual salary of 24,000. Real estate taxes are 10,000 per year. The rooms rent at an average price of 60 per person per night. Other costs are laundry and cleaning service at a cost of 10 per person per night and the cost of breakfast which is 5 per person per night. Required: (a) Indicate the number of rentals and the sales revenue kong needs to break even using the contribution margin technique. (b) If the current level of rentals is 4,000, by what percentage can rentals decrease before kong has to worry about having a net loss? (c) kong is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional 3 food costs per person per night. kongfeels she can increase the room rate to 68 per person per night. Indicate the number of rentals and the sales revenue kong needs to break even if the changes are

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Jenny Noon operates a Bed and Breakfast Inn in a resort area in the Ozark Mountains. The rooms rent at an average price of $60.00 per person per night (including meals). Depreciation on the inn is $40,000 per year. Jenny employs a part-time maintenance person at an annual salary of $17,000 per year and a cleaning person at an annual salary of $19,000 per year. Real estate taxes are $5,000 per year. Other costs are laundry service at a cost of $2.50 per person per night and the cost of food which is $3.50 per person per night. (Assume all guests will use the laundry service and eat their evening meal). Determine the dollar amount AND the number of guest rentals Jenny needs to break-even. Can you show your workings please?
"Rough & Ready" is a tool manufacturing business based in Melbourne. The entity's tax rate is 30%. It is considering the replacement of a manually operated machine with a fully automated model. One full-time staff member is currently employed to manually operate the current machine. This costs the company $120,000 p.a. in wages, holiday loading and compulsory superannuation payments. It also includes money spent on engaging another person when the full-time staff member goes on holidays or calls in sick. The manual machine's maintenance costs are $12,000 per year. The manually operated machine was bought 4 years ago for $75,000. The Australian Tax Office schedule includes the asset in the 12-year useful-life category and only allows prime cost depreciation (with no residual) for this type of equipment. This is a straight-line depreciation method with no residual. The company believed that the machine normally would be taken out of service at the 12-year point. The current disposal…
The Johnson Company pays $1700 a month to a trucker to haul wastepaper and cardboard to the city dump. The material could be recycled if the company were to buy a $48,000 hydraulic press baler and spend $21,000 a year for labor to operate the baler. The baler has an estimated useful life of 15 years and no salvage value. Strapping material would cost $1500 per year for the estimated 600 bales a year that would be produced. A wastepaper company will pick up the bales at the plant and pay Johnson $27 per bale for them. Use an annual cash flow analysis and an interest rate of 8% to recommend whether it is economical to install and operate the baler.
Martin D. Martian Inc. is considering the purchase of a new argyle sock knitting machine to replace a less automated one. The new machine will cost $250,000 plus $30,000 for shipping and $16,000 installation. The machine being replaced was purchased five years ago for $180,000 and depreciated as a 7-year MACRS property. It can be sold for $64,000. Martin has a marginal tax rate of 40%. Compute the NINV for the project. Use the rounded MACRS schedule listed below: (7-Year Depreciation Schedule: 14%, 25%, 18%, 12%, 9%, 9%, 9%, 4%)
Nancy's Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $36,000 per year. Nancy can buy a used truck for $8,000 that will be adequate for the next 3 years. Operating and maintenance costs are estimated to be $27,000 per year. At the end of 3 years, the used truck will have an estimated salvage value of $2,000. Nancy's MARR is 24%/year. a. What is this investment's internal rate of return? IRR = % Do all calculations to 5 decimal places and round final answer to the whole number. The tolerance is +/- 1.
GoHigher is planning to purchase a machine that will cost $24,000. It has a six-year life with no salvage value. GoHigher expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. Sales . $90,000 Costs: Manufacturing... Depreciation on machine. Selling and administrative expenses. Income before taxes .. Income tax (50%). $52,000 4,000 30,000 (86.000) $ 4,000 ( 2,000) $ 2,000 Net income. What is GoHigher's payback period for this machine? 24 years. 1 year. 4 years. 12 years. 6 years.
Aldo Redondo drives his own car on company business. His employer reimburses him for such travel at the rate of 36 cents per mile. Aldo estimates that his i xed costs per year such as taxes, insurance, and depreciation are $2,052. The direct or variable costs such as gas, oil, and maintenance average about 14.4 cents per mile. How many miles must he drive to break even?
An air-conditioning contractor is installing a heat pump system in a privatehome. He has agreed to do the job for the cost of parts and labor plus acontractor’s fee of 9% of the total. The heat pump costs $1,495, the electricalsupplies $53, the ducting $81, and the other supplies $39. Three men work16 hours each to install the system. They are paid $14 per hour. Sales tax is6% of the subtotal of the cost for parts, labor, and contractor’s fee.a. What is the total cost for parts and labor?
A contractor has purchased a small backhoe for $120,000 that he plans to use in excavating ditches for utilities construction. He plans to use the backhoe for 8 years and sell the used machine for $40,000. He must replace the tires on the backhoe after each 3,000 hours of use at a cost of $15,000. Annual operating and labor costs are estimated to be $20,000 per year. The contractor estimates that the backhoe will be used about 1,000 hours per year. If the minimum attractive rate of return is 12%; what is the hourly owning and operating cost for the backhoe? Please required urgent... Thank you
A carpenter produced 200 sofas which he sold at k5000/ sofa, he incurred k5000 on raw materials, he has three labours and he paid k6000 as wages for the three labourers, he does not have a building of his own, and paid k200 as rental fees. The carpenter decided to get a loan from NATSAVE of k250,000 at the interest rate of 20%. He inputed k2000 in january and k1500 in february. using the information given above compute; i. Accounting Profit for the carpenter ii. Economic profit for the carpenter Handwritten only pls, otherwise downvote
A certain factory building has an old lightingsystem. Lighting the building currently costs, on average, $20,000 a year. A lighting consultant tells thefactory supervisor that the lighting bill can be reducedto $8,000 a year if $50,000 is invested in new lightingin the building. If the new lighting system is installed,an incremental maintenance cost of $3,000 per yearmust be taken into account. The new lighting systemhas zero salvage value at the end of its life. If the oldlighting system also has zero salvage value, and thenew lighting system is estimated to have a life of 20years, what is the net annual benefit for this investment in new lighting? Take the MARR to be 12%.Assume the old lighting system will last 20 years.6.43 Your company needs a machine for the nextseven years, and you have two choices (assume anannual interest rate of 15%).• Machine A costs $100,000 and has an annual operating cost of $47,000. Machine A has a useful lifeof seven years and a salvage value of…
Peachtree Construction Company, a highway contractor, is considering the purchase of a new trench excavator that costs $300,000 and can dig a 3-foot-wide trench at the rate of 16 feet per hour. The contractor gets paid according to the usage of the equipment. $100 per hour. The expected average annual usage is 500 hours, and maintenance and operating costs will be $10 per hour. The contractor will depreciate the equipment by using a five-year MACRS, units-of-production method. At the end of five years, the excavator will be sold for $100,000.(a) Assuming that the contractor's marginal tax rate is 35% per year, determine the annual after-tax cash flow.(b) Is this a good investment if the contractor requires 15% return on investment?