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3. The pleasure leisure hotel has 30 bedrooms. The hotel is open all year round and has a capacity of 10,950 (30 x 365) bed-nights.

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3. The pleasure leisure hotel has 30 bedrooms. The hotel is open all year round and has a capacity of 10,950 (30 x 365) bed-nights. It is anticipated only 9,000 rooms will be taken up this year. However Duncan tours Ltd. has offered to take up the spare Capacity of 1,950 bed-nights to per bed-night. The hotel normally charges $50 a night, with the variable cost per room amounting to $15 and annual fixed costs amounting to $135,000. The following is the summary profit statement based on selling 9,000 bed nights: Per unit Total Sales $ 50 $450,000 Less: Variable costs 135,000 Fixed costs 135,000 Projected Net' profit 180,000 a) Calculate the incremental profit of loss of the company. (3 marks) b) Should the hotel take up the offer from the tour company? Give suitable advice the company. (2 marks)

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