Disney Hotels southern beach location has 500 rooms and rents hotel rooms for $180/night. At the current
Question:
Disney Hotel’s southern beach location has 500 rooms and rents hotel rooms for $180/night. At the current sales
level of 400 rooms per night, Disney currently makes a profit of $50/room per night:
Sales $180
Costs 130
Profit 50
It costs the beach location hotel $130/night to maintain a room ($100 in depreciation, $25 in variable maintenance, and $5 in variable booking costs).
The beach location hotel has been approached by Apple to purchase a block of 220 rooms for $140/room per night for one night for a convention. If this special order is accepted, Apple would take care of all booking costs for the rooms booked through Apple. However, the beach location hotel would have to allow Apple to hang a large sign for the convention on the side of the hotel – this will cost Luxury $3,000 in labor costs.
Should the beach location hotel accept this special offer? Include both qualitative and quantitative analysis
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ