Reference no: EM131518955

Question: Saturn Ltd, a large American hotel organization, has purchased a small rooming house on a property adjacent to one of its main hotels. The acquisition was made with a view to demolishing much of the existing structure and building a custom-designed health club that could be used by hotel guests. Building of the new health club is not due to start for at least a year. Saturn has been approached by Reg Norman, a contact of the property's vendor. Norman specializes in arranging golfing holidays. In keeping with the last 5 years, Norman wants to use the building for 30 weeks to house a particular niche market of ‘economy golfers'. Norman says that he can provide between six and fifteen guests per week. Under the proposed arrangement, Norman will pay Saturn $200 for each guest provided with lodging and morning and evening meals for a week. Saturn's accountant has developed the following cost data which he believes relevant to the decision of whether to accept Norman's offer.