Accounting for Managers Question:

The senior management at Hotel Magneta is reviewing the performance of the hotel and making plans for the year. The information is as follow:

	RM
Sales	4,000,000
Variable cost	800,000
Contribution margin	3,200,000
Fixed cost	2,400,000
Net income/(loss)	800,000

The total estimated number of guest nights for the current year is 50,000, with each guest night being charged at the same rate. The results follow a regular pattern; there are no unexpected cost fluctuations beyond the seasonal business pattern shown above. For the year, management anticipates an increase in unit variable cost of 10% and a profit target for the hotel of RM1 million. These will be integrated into the plans.

Required:

1. Calculate the target net income per guest. If there is no increase in guests for next year, what will be the required sales revenue rate per hotel guest to meet the profit target?
2. If the required revenue rate per guest is not raised above this years level, how many guests will be required to meet the profit target?