There is the following information ( Monthly P&L ) for Honey's Motel, which has two types of
Question:
There is the following information (Monthly P&L) for Honey's Motel, which has two types of rooms: single and double type. Price per room and variable costs per room for each type of room (Single and Double) are included in the P&L. Last month, the hotel sold 80 double rooms and 75 single rooms.
Total number of rooms sold
Double Rooms: 80
Single Rooms: 75
ADR
Double Rooms: $150
Single Rooms: $120
Total Revenue: $21,000
Variable Cost per room
Double Rooms: $50
Single Rooms: $30
Total Variable Cost:$6,250
Total Contribution Margin: $14,750
Total Fixed Cost: $15,000
Net Income: -$250
The owner is planning to renovate theDOUBLEroom to increase sales for the next month. Additional costs for this maintenance (through the renovation) is estimated at $ 4,000, which means the Fixed Costs will increase by $4,000. To recoup this additional expense, how many DOUBLE rooms you have to sell next month? (sales of single room remains the same).
Expert Answer:
Managerial Economics Theory Applications and Cases
ISBN: 978-0393912777
8th edition
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
