Your Student Association Is Looking for an Auditorium to Rent

question 246

Essay

Your student association is looking for an auditorium to rent for an all-day conference. The university's Performing Arts Center is vacant on that day, so the association wants to rent it. The physical plant manager tells you that the daily rent is $660, which includes $400 to cover part of the cost paid to build the Center, $40 to cover part of its regular maintenance cost, $50 to help pay for the building's insurance, $100 to cover the extra cost of electricity that the university would incur because of the conference, and $70 to pay for additional janitorial services for the conference. You know that no one else wants to rent the Center on that day and you think that the price that the manager charges is too high. But how much should you pay? Use the economic way of thinking to answer this question and to convince the manager to accept your offer:
a) If you rent the Center, what will be the university's marginal cost of renting the center to you?
b) If you rent the Center, what will be the university's marginal benefit of renting the center to you?
c) What amount of rent should you offer? Convince the manager to accept your offer.

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Definitions:

Current Assets

Current assets refer to all assets that a company expects to convert into cash or use up within one year or its operating cycle, whichever is longer, including cash, inventory, and accounts receivable.

Statement Of Financial Position

A financial statement that details an entity's assets, liabilities, and shareholders' equity at a specific point in time, offering a snapshot of its financial condition.

Current Liabilities

Short-term financial obligations due within one year or within a normal operating cycle.