Sure! Let's break down the situation and **step-by-step solution** for what Holiday Group, Inc. is considering, based on the information provided. --- # **Step-by-Step Solution** ## **Step 1: Understanding the Background** - **Holiday Group, Inc.** is a hotel group in Alberta, Canada, managing five hotels. - They buy all their beverages from regional dealers, which used to be a good income source. - The CEO is considering making their own proprietary juice and cocktail brand. - If successful, they could also sell it outside their hotels. --- ## **Step 2: Research Phases and Costs** The company conducted **research from September to December 2025**, divided into three phases: ### **Phase 1: Customer Feedback** - **Action:** Questionnaires and suggestions from room guests and restaurant customers. - **Cost:** Absorbed in normal operations (no extra cost). - **Result:** Encouraging and positive feedback. ### **Phase 2: Sample Production** - **Action:** Free tasting sessions in reception and restaurants. - **Cost:** $8,000 (for sample production). - **Result:** Positive feedback from tasters. ### **Phase 3: Marketing Research/Pilot Group** - **Action:** Marketing research and pilot tasting group by Alberta Marketer, Inc. - **Cost:** $40,000. - **Result:** Marketer found the product attractive and recommended a **5-year pilot project**. --- ## **Step 3: Proposed Next Steps** - The Group is considering investing in a **juice processing and bottling facility**. - The facility is an **abandoned storage facility** (no resale value). - A **production machine** (expected life: 5 years) will be acquired for the project. --- ## **Step 4: Key Calculations and Decisions** ### **A. Total Research Cost** Add the costs from the research phases (Phase 1 was absorbed, so only Phases 2 and 3 count): - **Phase 2:** $8,000 - **Phase 3:** $40,000 - **Total Research Cost:** \[ \$8,000 + \$40,000 = \$48,000 \] ### **B. Facility and Equipment** - The processing and bottling facility has **no resale value** (already owned, no opportunity cost). - The production machine will be **newly acquired** and will last **5 years**. --- ## **Step 5: Conclusion/Final Answer** ### **Summary Table** | Phase | Activity | Cost | Result | |---------------|-----------------------------------------------|-----------|-----------------------| | Phase 1 | Questionnaires & Suggestions | $ | Positive | | Phase 2 | Sample Production & Tasting | $8,000 | Positive | | Phase 3 | Marketing Research & Pilot Group | $40,000 | Positive, Recommend | - **Total research cost incurred:** **$48,000** - **Facility:** No additional cost (abandoned, no resale value) - **Machine:** Will be purchased, lasts 5 years ### **Final Answer** > **The total research cost incurred for evaluating the proprietary juice and cocktail initiative was $48,000 ($8,000 for sample production and $40,000 for marketing research). The next step is to invest in a production machine, expected to last five years, using the abandoned facility (which has no resale value), to launch a 5-year pilot project for small-scale production.** --- If you have follow-up questions about the financial analysis (e.g., depreciation, cash flows, or break-even), let me know!