Question: 1. Why do so many different classifications of cost arise in accounting?

2 The conference department of the MerryWeather hotel in Inverness, Scotland has fixed costs of £360 per day. A local university is seeking a quote in connection with a conference it is planning to hold next year. The university would like the hotel to provide morning coffee, lunch, afternoon tea and to prepare conference materials to be distributed to all conference attendees. The hotel's cost of providing food and drink during the day is £7 per attendee. In addition, preparing the conference materials would cost the hotel £6 per attendee. The university has estimated that the conference will be attended by between 80 and 120 people.

Required

(a) What is the total average cost per attendee if the conference has an attendance of 80 people?

(b) What is the total average cost per attendee if the conference has an attendance of 120 people?

(c) Explain why the cost per attendee is affected by the number of people that attend the conference.

(d) If 120 people attend the conference and the hotel wants to earn a profit of 20% on revenue, what price per person should be charged?

(e) There are several other local hotels that provide conference facilities.

The university, which holds several conferences per year, has always used a venue provided by MerryWeather's main competitor. MerryWeather's conference manager is exceedingly keen to develop a working relationship with the University and has received permission from the General Manager to provide a very aggressively priced quote to the University. To help in his deliberations on this matter, the conference manager has approached MerryWeather's accounting department and asked them to determine what is the lowest price that can be charged per attendee without the conference adversely affecting this year's hotel profit. If you were an accountant at MerryWeather, what advice would you give to the conference manager?