Complex question

[zeba3]

Hi....

I am not able to solve this complex question.

Health and Racket bought a squash centre, consisting of 12 courts at a price od R 1,800,000. The acquisition was financed by means of a loan, which is repayable, annually in arrears, in installments of R100,000 capital, plus interest at 16% 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 96,000
Wages(fixed) 18,216
Electricity and water(fixed) 33,600
Repairs and maintenance at 80% capacity utilization 30,624
Repairs and maintenance at 60% capacity utilization 25,368

Electricity -per hour per court per hour played R1.20
Squash courts will be let out at R8 per 30 minutes.
The squash centre will be open from 06h00 to 21h00 everyday for the year.

<b>Required</b>
1. Determine the maximum number of games that can be played per annum.
2. Determine the fixed and variable elements of repairs and maintenance costs.
3. Calculate the marginal income per game.
4. Determine the number of games that must be played during the next financial year for the company to earn a profit of R48,000.
5. Determine the capacity utilization in (question 4) above.

Please help!!!

[Kasim]

miss zeba
mohsin sheikh
is the only one member here
who is interested in asking/replying
such questions
u may ask him for this favor
regards

[syed_mayaz]

1.we assume that one squash game takes 30mins...
so,
2 games can be played in 1 hour (3o minutes each)
therefore, ine one day from 06hr to 21hr = 15hours * 2games = 30 games per day
and so on in a year (365 days) maximum games that can be played = 30 * 365 = 10950 per court.
so for 12 courts = 10950 * 12 = 131400 games

[syed_mayaz]

2. fixed and variable element...
in any question if we are asked to find fixed and variable portion then 1st look whether any information is given or not as per hour variable cost etc or budgetted production( and per hour fixed cost )..
If not then we use High & Low method...Although i call this method Desi Tareqay Qaar but to solve a questions it bores some worth.

Now, we move further...

80 % =======>>>> 30,624
60% =======>>>> 25,368
Now substract the lowest values from higher ones

20 =======>>>> 5,266
Now divide 5,266 by 20 = 262.8 ( This is your variable element )
FIXED ELEMENT
Variable + Fixed cost = Total
at 60% utilization
60*262.8 + Fixed = 25,368
Fixed = 25,368 - 15,768 = 9,600

same at 80% utilization you will get 9,600 as it is fixed for every level of utilization.