A further consideration of the investment proposal by the Hotel Manager concerns the pricing of airport services: Average direct costs are estimated to be £10 per passenger (including on-board refreshments). Total related annual overhead costs for the year are £24,000. A total of 6,000 passengers are estimated over the year. The most popular trip is forecast to be to Bristol Airport, as this is larger than Exeter Airport. (Appendix 1). An accounting-based price is to be calculated for initial discussions. Head Office has suggested a 40% mark-up on the full cost as a basis for pricing. Historically, an absorption rate basis has been used. The activity-based costing (ABC) method is under consideration by Buenos Dias plc Head Office for implementation across the chain within the next financial year. The following information has been estimated for this purpose: Activity Reservations & Administration (RA) Coach Provision & Maintenance (CPM) Driver & Guest Services (DGS) Cost £ 3,000 15,000 6,000 Driver Total Number of seats booked 6,000 Number of Trips Number of Trips 500 500 Bristol Airport 1,000 200 200 Requirement: Section C of your report to the Exeter hotel manager. Evaluate and advise on costing and pricing considerations of the Bristol Airport service.
A further consideration of the investment proposal by the Hotel Manager concerns the pricing of airport services: Average direct costs are estimated to be £10 per passenger (including on-board refreshments). Total related annual overhead costs for the year are £24,000. A total of 6,000 passengers are estimated over the year. The most popular trip is forecast to be to Bristol Airport, as this is larger than Exeter Airport. (Appendix 1). An accounting-based price is to be calculated for initial discussions. Head Office has suggested a 40% mark-up on the full cost as a basis for pricing. Historically, an absorption rate basis has been used. The activity-based costing (ABC) method is under consideration by Buenos Dias plc Head Office for implementation across the chain within the next financial year. The following information has been estimated for this purpose: Activity Reservations & Administration (RA) Coach Provision & Maintenance (CPM) Driver & Guest Services (DGS) Cost £ 3,000 15,000 6,000 Driver Total Number of seats booked 6,000 Number of Trips Number of Trips 500 500 Bristol Airport 1,000 200 200 Requirement: Section C of your report to the Exeter hotel manager. Evaluate and advise on costing and pricing considerations of the Bristol Airport service.
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
Section: Chapter Questions
Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning