ACFI 5013 Applied Financial Skills – Assignment 1
Oxford Spire Hostel
Oxford Spire Hostel is a not-for-profit hostel with 23 beds. It is run by a local charity, using a combination of paid and volunteer labour. The current number of guests per year averages 5,000, who pay £15.00 for their bed, washing facilities, internet/computer access, an evening meal and breakfast. The hostel opens 351 days a year.
The Hostel has experienced long-term losses. The trustees have decided that the losses are not sustainable and would like to reduce the deficit to 0 for next year. However, costs are also expected to rise, as shown below:
|Costs||Current||Increase next year|
In order to achieve a zero subsidy, the trustees are considering the following three options for the next year’s operation:
a) Find a new room rate to be charged;
b) Keep existing room rate but try to increase occupancy (i.e. number of room bookings);
c) Find another new room rate based on a forecast of additional room bookings.
- Calculate and briefly discuss the new price to be charged for option a)
- Calculate and briefly discuss the required room bookings for option b)
- Calculate and briefly discuss the new price to be charged for option c). Additional 1,000 bookings are forecasted to come to the next year.
- Discuss weakness and strength of the pricing strategy you have used for the calculations. Elaborate any recommendations you can give to help the hostel maximise its revenue.
- Refer to week 4 class lecture slides to understand the detailed requirements to each of the four questions.
- Ignore VAT throughout the scenario.
- You are encouraged to use no more than three academic references.
Your mark will depend on how well you have completed the following criteria:
|Q 1||10 marks: Clear discussion and correct calculation, each 5 marks|
|Q 2||10 marks: Clear discussion and correct calculation, each 5 marks|
|Q 3||10 marks: Clear discussion and correct calculation, each 5 marks|
|Q 4||10 marks: each 5 marks|
|Overall comments||Total 40 marks|