Accept business at a special price for a service company If you are not familiar with Priceline.com Inc., go to its Web site. Assume that an individual

“names a price” of $85 on Priceline.com for a room in Nashville, Tennessee, on August 22.

Assume that August 22 is a Saturday, with low expected room demand in Nashville at a Marriott International, Inc., hotel, so there is excess room capacity. The fully allocated cost per room per day is assumed from hotel records as follows:

Housekeeping labor cost* $ 38 Hotel depreciation expense 43 Cost of room supplies (soap, paper, etc.) 8 Laundry labor and material cost* 10 Cost of desk staff 6 Utility cost (mostly air conditioning) 5 Total cost per room per day $110

*Both housekeeping and laundry staff include many part-time workers, so that the workload is variable to demand.

Should Marriott accept the customer bid for a night in Nashville on August 22 at a price of $85?