Soverign Lodge

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SOVEREIGN LODGE

1]. List all the relevant decision alternatives in Mr.Kacheck’s proposal.

The relevant decision alternatives in Mr. Kacheck’s proposal are listed below...
OPTION 1: Open in summer without advertisement.

OPTION 2: Open in summer with advertisement.

OPTION 3: Open with pool, no bubble and with the Advertisement.

OPTION 4: Open with pool, bubble and with the Advertisement.

OPTION 5: The presently existing values.

NOTE: we don’t calculate the alternative for each no pool because in the case study they have mentioned that in the long time run the viability of the pool should stay even with the competition

So these are the six alternatives relevant decision in Mr.Kacheck’s proposal.

2. For each alternative from question 1, list the annual expenses that are incremental to that decision alternative but are not related to the room/days occupied, i.e. the incremental fixed costs for each alternative.

Option 1: Open in summer without advertisement.

Option I
Description existing open in summer without adv

Revenues 160800 180960

Salaries
Manager 15000 15000 mgr wife 2400 5600 Desk clerk 2880 2880 Maids (4) 7200 21600 Total 27480 45080 Payroll taxes & fbt5496 9016 Depreciation 30000 30000 Property taxes 4000 4000 Insurance 3000 3000 Repairs & maint 17204 17204 Cleaning supplies 1920 2280 Utilities 6360 10680 Linen service 13920 20880 Interest on mortgage21716 21716 Misc exp 7314 8000 Incremental repairs 2000 Incremental insurance 500 Incremental adv

Incremental depr
Incremental costs

Total expenses 138410 174356

Profit 22390 6604 Taxes @ 48% 10747 3170

Nett profit 11643 3434

OPTION 2: Open in summer with advertisement.

Option II
Descriptionopens in summer with adv

Revenues 191040

Salaries
Manager 5000
Mgr wife 5600
Desk clerk 2880
Maids (4) 21600
Total 45080
Payroll taxes & fbt 9016
Depreciation 30000
Property taxes 4000
Insurance 3000
Repairs & maint 17204
Cleaning supplies 2280
Utilities 10680
Linen service 24360
Interest on mortgage 21716
Misc exp 8685
Incremental repairs 2000
Incremental insurance 500
Incremental adv...
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