Adidis Limited bought a squash centre, consisting of six courts, in a southern suburb of Polokwane at a price of R900 000. The deal was financed by means of a loan, which is repayable annually in arrears in instalments of R100 000 capital plus interest of 18% p.a. on the outstanding capital. To date, one payment has been made. The budgeted operating costs of the centre for the next financial year are as follows: Salaries: R 48 000 wages(fixed) R 9 108
Adidis Limited bought a squash centre, consisting of six courts, in a southern suburb of Polokwane at a price of R900 000. The deal was financed by means of a loan, which is repayable annually in arrears in instalments of R100 000 capital plus interest of 18% p.a. on the outstanding capital. To date, one payment has been made.
The budgeted operating costs of the centre for the next financial year are as follows:
Salaries: R 48 000
wages(fixed) R 9 108
electricity and water:
fixed R 16 800
per court per hour played R 1.20
Repairs and maintainance:
at 80% capacity utilization R15 312
at 60 % capacity utilization R 12684
Squash courts will be rented out at R8 per 30 minutes. The centre will be open between 07h00 and 22h00 for seven days per week including public holidays.
Determine the maximum number of games that can be played per annum.
Calculate the marginal income per game.
Determine the number of games that must be played during the next financial year for the
company to earn a profit of R24 000 and the capacity utilization.
The results of a market survey indicate a capacity utilization of 33 000 and 600 games per annum. In order to improve the expected performance of the company, a suggestion has been made to prolong playing hours by two hours per day as well as to increase the rental per court by 25%.
It is anticipated that the implementation of the above suggestion will result in salaries increasing by 20% and the expected capacity utilization decreasing to 90% of the reachable capacity per the market survey. Calculate the expected net income for the next financial year should the above-mentioned suggestions be accepted.
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