{Decision Making} - CVP Analysis - Capacity Usage of a Leisure Centre

Advanced -


A local government authority owns and operates a leisure centre with numerous sporting facilities, residential accommodation, a cafeteria and a sports shop. The summer season lasts 20 weeks including a peak period of six weeks corresponding to the school holidays. The following budgets have been prepared for the next summer season:


Accommodation 
60 single rooms let on a daily basis
35 double rooms let on a daily basis at 160 per cent of the single room rate.
Fixed costs £29,900
Variable costs £4 per single room per day and £6.40 per double room per day.
Sports Centre 
Residential guests each pay £2 per day and casual visitors £3 per day for the use of facilities.
Fixed costs £15,500
Sports Shop
Estimated contribution £1 per person per day.
Fixed costs £8250
Cafeteria 
Estimated contribution £1.50 per day.
Fixed costs £12,750


During the summer season the centre is open seven days a week and the following activity levels are anticipated.


Double rooms fully booked for the whole season.


Single rooms fully booked for the peak period but at only $0 per cent of capacity during the rest of the season.
30 casual visitors per day on average.


Questions -
a): Calculate the charges for the single and double bedrooms assuming that the authority wishes to take £10,000 profit on accommodation.
b): Calculate the anticipated total profit for the leisure centre as a whole for the season.


Ans -
a): £4 * 60 = £240 
£6.40 * 35 = £224 (approx)


£240 * 30 * 7 = £7200 {*7} = £50400  {1 week}
£224 * 35 * 7 = £7800 {*7} = £62400 {1 week}


Total for 1 week = £112,800 
Minus £10,000 profit = £102,800


Equals = £102,800 


£112,800 * 20 = £2,256,000 {Total Profit}
Fixed Costs = £29,900 
  £2,256,600
- £   29,900
=  2,226,700
-     10,000
=  2,216,700
Total Charges : 39,900
Total Profit: 2,216,700


b): RVisitors: £2 * 7 = £14 
CVisitors: £3 * 7 = £21


£14 * 30 = £420 
£21 * 30 = £630


£420 * 30 = 12600
£630 * 30 = 19200


Total: 12,600 + 19,200 = 31,800
£10,000 - Accommodation Authority Fee
£15,500 - Fixed Costs
= £6,300 {Total Profit Remaining}


Thank you very much =)