Following is the information given by the owner of a hotel. You are required to advise him what rent should be charged from customers per day so that he is able to earn 25% profit on cost other than interest.
- Staff salaries Rs 80,000 per annum
- Room attendant’s salary Rs 2 per day: The salary is paid on daily basis and services of room attendant are needed only when the room is occupied. There is one attendant for one room.
- Lighting, heating and power: The normal lighting expenses for a room are Rs 50. Power is used only in winter and normal charge per month if occupied for a room is Rs 20.
- Repairs to buildings Rs 10,000 per annum
- Linen, etc. Rs 4,800 per annum
- Sundries Rs 6,600 per annum
- Interior decoration and furnishing Rs 10,000 per annum
- Cost of buildings Rs 4,00,000. Rate of depreciation is 5%
- Other equipment Rs 1,00,000. Rate of depreciation is 10%
- Interest at 5% may be charged on its investments of Rs 5,00,000 in the buildings and equipment
- There are 100 rooms in the hotel and 80% of the rooms are normally occupied in summer and 30% of the rooms are occupied in winter.
You many assume that period of summer and winter is six months each. Normal days in a month may be assumed to be 30.