Question

Single Charging Rates House Corporation Board (HCB) of Tri-Gamma Sorority is responsible for the operation of a two-story sorority house on the State University campus. HCB has set a normal capacity of 60 women. At any given point in time, there are 100 members of the chapter: 60 living in the house and 40 living elsewhere (e.g., in the freshman dorms on campus). HCB needs to set rates for the use of the house for the coming year. The following costs are budgeted: $240,000 fixed and $34,800 variable. The fixed costs are fairly insensitive to the number of women living in the house. Food is budgeted at $40,000 and is included in the fixed costs; food does not seem to vary greatly given the stated capacity. The variable expenses consist of telephone bills and some of the utilities. HCB is not responsible for chapter dues, party fees, pledging and initiation fees, and other social expenditures. Women living in the house eat 20 meals per week there and live in a two-person room. (All in-house members’ rooms, bathroom facilities, etc., are on the second floor.) All members eat Monday dinner at the house and have full use of house facilities (e.g., the two TV lounges, kitchens, access to milk and cereal at any time, study facilities, and so on). HCB has traditionally set two rates: one for in-house members and one for out-of-house members. There are 32 weeks in a school year. Required: Set charging rates for the in-house and out-of-house members. For interim computations, carry amounts out to the nearest cent. Round your final answers to the nearest dollar. Charging rate In-house members $ per year Out-of-house members $ per year

Answer 1

Particulars	amount($)
Inhouse Member Per Year Rate	4012.96$
Out of House Member Per Year Rate	67.06$

ASSUMING THE FIXED AND VARIABLE PRICES OF BUDGET ARE GIVEN ARE AT MAXIMUM CAPACITY OF 100

Step 1) Cost Comprise of Fixed and Variable Cost

Fixed:240000$

Food:200000

Others :40000

Variable: 34800

Step 2) As fixed Cost is insenstive to the capacity , Fixed Cost of 200000 $ would be absorbed on the normal capacity and such cost would not be charged with the out of house members

other Fixed Cost to In house members per women per year : 200000/60 = $3333.33

Food Cost is however insenstive but would be distibuted as per meal basis

as per the statement given in the question it can be assumed ot of house members have just taken one meal in a week that is monday dinner

Hence total no of meals would be: no. of meals/week*no of weeks*no of members

In house members : 20*32*60=384000

out f house membes : 1*32*40= 1280

Total meal 39680

Cost per meal = 40000/39680=1.01$

Cost per annum per meal per member would be:   

in house:. (40000*38400/39680) /60 645.16   

out of house (40000*1280/39680)/40 32.26

Step 3) Variable cost per member (assuming 34800 is for whole 100 members)

variable cost per member : 34800/100 =34.8

Step 4) Total Cost :

In House Members :

Fixed + Variable 645.16+3333+34.8=4012.96$

Out Of house members :

Food Cost + VAriable 32.26+34.8=67.06$

As out of house members doesnt live in the house we have assumed they have not utilized any of the facility like bathroom facility etc and fixed cost being insenstive of capacity would be absrbed on normal capacity and such cost would not be transferred to out of house members.