If Plowonida Hotels chooses to open the new budget hotel, estimated costs would be as follows:...

 

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If Plowonida Hotels chooses to open the new budget hotel, estimated costs would be as follows: New Budget Hotel Costs Variable costs per overnight stay in room Monthly maintenance & cleaning costs shared areas Other Annual Overheads Monthly Group Overhead costs Market research has revealed the following: ● ● £ 12.50 6,500 3,134,000 150,000 At weekends and some peak periods, the hotel might be full, however, at other times occupancy will be lower resulting in average annual room occupancy being 80%, if the hotel charges competitive rates. A nearby competitor offers similar accommodation at a fixed price of £175 per night. Plowonida hotels would like to achieve a minimum target annual profit of £760,000 to contribute towards group overhead costs; group overhead costs will be unaffected if the project is rejected. Required: Using Cost-Volume- Profit analysis you have been asked to write a memo offering advice to Plowonida Hotels including pricing options for the new budget hotel. Refer to the data above and illustrate your answer with diagrams and include any relevant calculations. Consider any limitations to your analysis. If Plowonida Hotels chooses to open the new budget hotel, estimated costs would be as follows: New Budget Hotel Costs Variable costs per overnight stay in room Monthly maintenance & cleaning costs shared areas Other Annual Overheads Monthly Group Overhead costs Market research has revealed the following: ● ● £ 12.50 6,500 3,134,000 150,000 At weekends and some peak periods, the hotel might be full, however, at other times occupancy will be lower resulting in average annual room occupancy being 80%, if the hotel charges competitive rates. A nearby competitor offers similar accommodation at a fixed price of £175 per night. Plowonida hotels would like to achieve a minimum target annual profit of £760,000 to contribute towards group overhead costs; group overhead costs will be unaffected if the project is rejected. Required: Using Cost-Volume- Profit analysis you have been asked to write a memo offering advice to Plowonida Hotels including pricing options for the new budget hotel. Refer to the data above and illustrate your answer with diagrams and include any relevant calculations. Consider any limitations to your analysis.

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Memo To Plowonida Hotels From Subject Advice on Pricing for the New Budget Hotel This memo is to adv... View the full answer