Jim Culf is the manager of the Royal Hotel, Bigtown-on-Sea. In anticipation of preparing next year€™s budget, he has analysed his recent costs and income. His findings are summarized below.
....................................................................................... £/week
Staff salaries................................................................... 2,000
Head office charge........................................................... 400
Depreciation of equipment and fittings........................ 875
Heating.............................................................................. 425
For each guest the average variable cost of food, drink, linen and sundries totals £100 per week. Jim considers all other overheads to be semi variable and has produced the following data from his records:

The average price charged for a week€™s stay is £240 per guest. Since it is a seaside hotel, the vast majority of its customers stay for either one or two weeks at a time.

Tasks:
1 Calculate the average number of guests needed each week to avoid making a loss.
2 The hotel can accommodate a maximum of 120 people. How much is the weekly profit if the average occupancy level is:
a) 70%?
b) 80%?
c) 90%?
3 Jim has been invited by an international tour company to quote a competitive price for a group of 20 Japanese tourists who wish to stay in the area for two weeks. They are due to arrive in 10 days€™ time.
a) Calculate the lowest price Jim can quote if he is to avoid making a loss on the tour. (Assume that the hotel is currently 70% booked for the two weeks in question.)
b) If Jim wants to make a profit of £2,000 from this tour, what price should he quote?

Transcribed Image Text:

Other overheads (£) Week no. Occupancy (no. of guests) 75 94 70 61 57 83 13 14 7,050 8,200 6,980 6,500 6,350 15 16 17 18 7,590 19 85 7,700