Cost-plus target return on investment pricing. Jason Brady is the managing partner of a business that has just finished building a 60-room motel. Brady anticipates that he will rent these rooms for 15,000 nights next year (or 15,000 room-nights). All rooms are similar and will rent for the same price. Brady esti- mates the following operating costs for next year: Variable operating costs $3 per room-night Fixed costs Salaries and wages Maintenance of building and pool Other operating and administration costs $177,000 38,000 190,000 Total fixed costs $405,000 The capital invested in the motel is $1,500,000. The partnership's target return on investment is 20%. Brady expects demand for rooms to be uniform throughout the year. He plans to price the rooms at full cost plus a markup on full cost to earn the target return on investment.

Cost-plus target return on investment pricing. Jason Brady is the managing partner of a business that has just finished building a 60-room motel. Brady anticipates that he will rent these rooms for 15,000 nights next year (or 15,000 room-nights). All rooms are similar and will rent for the same price. Brady esti- mates the following operating costs for next year: Variable operating costs $3 per room-night Fixed costs Salaries and wages Maintenance of building and pool Other operating and administration costs $177,000 38,000 190,000 Total fixed costs $405,000 The capital invested in the motel is $1,500,000. The partnership's target return on investment is 20%. Brady expects demand for rooms to be uniform throughout the year. He plans to price the rooms at full cost plus a markup on full cost to earn the target return on investment.

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

In what sense is the WACC an average cost? A marginal cost?
What is the Total equivalent annual cost?
Define each of the following terms.d. Stepped-up price
Alex is considering one of two options for reducing her heating bill during the winter: New windows New furnace $3,800 $650/y 10 y Purchasing price $4.500 Annual savings $650/y Lifespan 15 y Assuming her MARR is 5%, use any comparison means (PW/AW/FW) to determine which option she should consider. Salvage value for both options is zero.
How can we apply Annual-Worth Analysis for the calculation of Unit-Profit or Unit-Cost Calculation?
What is a selling expense budget? What is a capital expenditures budget?
asap
Please develop a spreadsheet to investigate the sensitivity of annual profit (loss) to changes in the occupancy rate and the annual rental rate.
What does the term sales mix mean? How is a weighted-average unit contribution margin computed?
How change in activity(sale) affect the contribution margin and net operating income?