The management of the Northern Sun Hotel group is very concerned because the average occupancy rate...

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The management of the Northern Sun Hotel group is very concerned because the average occupancy rate of its hotels has reduced dramatically. The occupancy of a typical hotel is as follows: First quarter Second quarter Third quarter Fourth quarter A typical hotel of the Northern Sun Hotel group has 200 rooms. The holiday season falls in the second and fourth quarters, when the price per room is R350. The price per room in the off-season is R220. The guests in the hotel spend on average 20% of their staying cost in the bar and 40% of their staying cost in the restaurant. The marketing director has launched an investigation and has reached the following conclusions: If the price per room in the off-season is reduced by 30%, the occupancy rate will increase by 20%. 50% 30% 40% 45% The following information regarding the cost structure (per annum) is available: 29 200 Rooms 40 150 Rooms R876 000 R1 204 500 R5 224 000 R6 100 000 R800 000 R800 000 R750 000 R750 000 R830 000 R1 022 000 R657 000 Cleaning materials Salaries Insurance Depreciation Laundry Meals Drinks If the price per room in the holiday season is reduced by 25%, the occupancy rate will increase by 40%. (b) Required (a) (c) Assume that there are 360 days in a year. Each quarter has the same number of days. R1 103 750 R1 405 250 R903 375 Determine the variable cost per room (meals and drinks included). If a cost item is semi- variable, you must use the high-low method to distinguish between fixed and variable costs.. Show your workings. (20) Determine the break-even point, in number of rooms, for the off-season. (15) 2 Calculate the margin of safety ,in units and ratio, for the off-season. (13) (d) What will the effect the margin of safety ratio for the off-season be if the proposal of the marketing director in respect of the off-season is accepted? Comment on your findings. (12) The management of the Northern Sun Hotel group is very concerned because the average occupancy rate of its hotels has reduced dramatically. The occupancy of a typical hotel is as follows: First quarter Second quarter Third quarter Fourth quarter A typical hotel of the Northern Sun Hotel group has 200 rooms. The holiday season falls in the second and fourth quarters, when the price per room is R350. The price per room in the off-season is R220. The guests in the hotel spend on average 20% of their staying cost in the bar and 40% of their staying cost in the restaurant. The marketing director has launched an investigation and has reached the following conclusions: If the price per room in the off-season is reduced by 30%, the occupancy rate will increase by 20%. 50% 30% 40% 45% The following information regarding the cost structure (per annum) is available: 29 200 Rooms 40 150 Rooms R876 000 R1 204 500 R5 224 000 R6 100 000 R800 000 R800 000 R750 000 R750 000 R830 000 R1 022 000 R657 000 Cleaning materials Salaries Insurance Depreciation Laundry Meals Drinks If the price per room in the holiday season is reduced by 25%, the occupancy rate will increase by 40%. (b) Required (a) (c) Assume that there are 360 days in a year. Each quarter has the same number of days. R1 103 750 R1 405 250 R903 375 Determine the variable cost per room (meals and drinks included). If a cost item is semi- variable, you must use the high-low method to distinguish between fixed and variable costs.. Show your workings. (20) Determine the break-even point, in number of rooms, for the off-season. (15) 2 Calculate the margin of safety ,in units and ratio, for the off-season. (13) (d) What will the effect the margin of safety ratio for the off-season be if the proposal of the marketing director in respect of the off-season is accepted? Comment on your findings. (12)

Answer rating: 100% (QA)

a Determination of variable cost per room Meals Clearly variable based on number of guests Drinks Clearly variable based on number of guests Cleaning ... View the full answer