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decision making, Managerial Accounting

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A local government authority owns and operates a leisure centre with numerous sporting facilities, residential accommodation, a cafeteria and a sports shop. The summer season lasts for 20 weeks including a peak period of six weeks corresponding to the school holidays. The following budgets have been prepared for the next summer season:

Accommodation

60 single rooms let on a daily basis.

35 double rooms let on a daily basis at 160% of the single room rate.

Fixed costs $29,900

Variable costs $4 per single room per day and $6.40 per double room per day.

Sports Centre

Residential guests each pay $2 per day and casual visitors $3 per day for the use of facilities. Fixed costs $15,500

Sports Shop

Estimated contribution $1 per person per day.

Fixed costs $8,250

Cafeteria

Estimated contribution $1.50 per person per day.

Fixed costs $12,750

During the summer season the centre is opened seven days a week and the following activity levels are anticipated:

Double rooms fully booked for the whole season.

Single rooms fully booked for the peak period but at only 80% of capacity during the rest of the season.

30 casual visitors per day on average.

Required:

a) Calculate the charges for single and double rooms assuming that the authority wishes to make a $10,000 profit on accommodation.

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