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Belton park question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Belton park question

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by John Moffat.
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  • June 27, 2021 at 3:20 pm #626475
    sadafwaheed1
    Member
    • Topics: 79
    • Replies: 29
    • ☆☆

    Hello sir in this question I cannot understand why maintenance cost is 10600 for hotel
    If hotel is closed cost will be 4000
    If hotel is open cost will be 14600
    We should take the cost of maintenance when hotel is open which 14600
    And in solution it’s say INCREMENTAL cost can you explain this

    June 27, 2021 at 3:36 pm #626483
    sadafwaheed1
    Member
    • Topics: 79
    • Replies: 29
    • ☆☆

    And also in answer revenue had contribution of EXTRAS but in cost EXTRAS Cost was not deducted why

    June 28, 2021 at 6:31 am #626506
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51538
    • ☆☆☆☆☆

    As I explain in my free lectures, ‘incremental’ means ‘extra’. So in this question the incremental costs are the extra costs of keeping the hotel open.

    The maintenance costs per month from the question are $14,600 if the hotel is open.

    Per note (2) of the question the cost will be $4,000 is the hotel is closed.

    Therefore the extra cost of keeping the hotel open is the difference of $10,600.

    Contribution is the revenue less the variable costs. Therefore the extra contribution already takes into account the extra variable costs.

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