Question 3 is based on the following case study.

Overlook Lodge:

The Overlook Lodge is currently charging a set price of R1,500 a night for their rooms. They have 120 rooms, but sales usually average 80 rooms per night. They have some variable costs, such as air-conditioning, cleaning, and the cost of soap, shampoo, coffee, tea, and electricity. The variable costs amount to R250 per room. This brings about net sales of R100,000.

The Overlook Lodge decides to use yield management to boost sales. After conducting some research and using specialised computer software, they decide to set three prices for the rooms. These prices are as follows:

Room 1: R900 (20 rooms)

Room 2: R1,400 (20 rooms)

Room 3: R2,000 (40 rooms)

Using the above information (including the variable costs), calculate the total net sales that the Lodge will produce. Show the formula and all your calculations to gain full marks.

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