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Attached are documents giving the background financial information regarding Fairview Manor and the task that you have to complete. You are required to produce an individual report, on your own, outside the Pod session and submit it via the Assignment Submissions by the beginning of the second Pod session in week 4. Assessment This assignment is an individual piece of work and accounts for 10% of your Phase 2 marks. Good pieces of work will show most or all the following characteristics: Accurate apportionment of fixed costs and calculation of variable costs
Accurate calculation of Break Even Points and Maximum Profits Effective use of MS EXCEL Clear, accurately labeled charts Well argued, sensible suggestions for weekly rental prices and final pricing structure. Submission Submit your work on your cohort BORE site before the second pod session of Phase 2, Week 4. If you have a morning pod submit before 8. 45 am and if you have an afternoon pod submit before 1 1 :45 am.
Costing Activity Universal Marketing PL, an international timeshare marketing company, are the developers of a new Timeshare and Leisure complex, Fairview Manor, coated in the West Country. The Company needs to decide upon a fair price per apartment/week for the holiday apartments which they are about to offer for sale. Strain Petrol, the Marketing Director, at a recent Board meeting, expressed a view that a “one-off’ price per apartment/week with no additional charges would make the apartments highly marketable. The Board of Directors have agreed that all fixed costs should be apportioned (i. . Shared out) on the basis of total rooms. The Company has carried out market research and the data that they have obtained regarding prices charged, by competitors, for similar apartments is as follows :- Bedroom IEEE – IEEE I EYE -EYE Studio I One Bedroom I Two I I Weekly price range I IEEE – IEEE I EYE – EYE | 225 – IEEE I I “On-off price” range 2,000 – EYE,750 The Board of Directors wish to know what the Breakable Point for each type of apartment would be at the upper and lower ends of the price ranges.
They also wish to know what the maximum profit would be for each type of apartment if all apartment/weeks were to be sold. The Marketing Director wishes to retain some apartments on a “weekly rental only” basis. These apartments could also be used as “tasters” for future marketing campaigns, but is not sure whether the rental of an apartment/week should be the same as the price would be for someone buying an equivalent apartment/week. The price ranges given are annual averages as actual price would vary according to season.
The “one-off price” is for 30 years of ownership and has been calculated by multiplying the weekly price by 30. The Directors have produced the attached information regarding costs, size of apartments and maximum occupancy to help with your calculations. Universal Marketing PL Background Information – Fairview Manor Information relating to costs Variable Costs Cleaning materials per room per week 0. 40 Cleaning cost per room per week 10. 50 Electrical Cost per room per week (average) 3. 0 Average Laundry Cost per occupant per week 2. 50 Fixed Costs Building cost depreciated over 30 years (per year) 150,000 Depreciation of Furniture & Fittings (per year) 100,000 Administration Costs per year 200,000 Maintenance Costs per year 150,000 Gymnasium & Recreation Facilities per year 25,000 Other Information Life of Complex (years) 30 Initial Building Cost of Complex Apartment Details Every apartment has a kitchen and a bathroom, in addition to its other rooms.
Studio apartments have a combined living room/bedroom; One bedroom apartments have a separate living room and a bedroom Two bedroom apartments have a living room, a separate dining room and two bedrooms. Studio 1 Bedrooms Bedroom No of apartments 654 10 Maximum number of occupants 246 The Task As a newly appointed graduate management trainee you have been asked, by the Marketing Director, to produce a short report for the Board of Directors to address the following points. 1 . The apportionment of fixed costs over the three apartment types 2.
The weekly variable cost per apartment 3. Breakable points for the upper and lower selling prices for each type of apartment 4. Maximum profit, for a year, obtainable for each type of apartment at both the upper and lower prices. (Using the price for an apartment/week and the weekly variable cost and the apportioned fixed cost for the apartment type). 5. Any suggestions you may have for weekly rental prices of apartment/weeks ND any other factors which you think that Universal Marketing should take into account when setting their final prices.
Some graphical representation would be useful. The Directors may wish to ask you to explain your calculations. Hints Timeshare apartments are sold by the “apartment week” and people buy a particular calendar week which is then theirs to use every year. Some seasons of the year might be more expensive than others. The summer season would usually cost more than Autumn or Winter, the last week in December would be more expensive too. If you have 6 apartments then you have 312 apartment weeks for sale, because there are 52 weeks in a year.
Remember some variable costs are expressed per room and apartments have more than one room. Remember, some variable costs are expressed per occupant and that an apartment has a maximum number of occupants. Remember all fixed costs are given per year and the complex has a life of 30 years. For the rental of the unsold apartments you need to think not only in terms of the marginal cost but also the expectations of the apartment owners.