Amazing Field Luxury Resorts has been evaluating how it might expand its sustainability efforts in its hotels.
To evaluate these options, management has gathered data for the past year for its laundry costs and housekeeping costs. The costs and occupancy data include:
In any given month, an average of 73,000 room days are available in total (this total capacity figure is roughly estimated by taking the total number of hotel rooms in the hotels owned by Amazing Field and multiplying by 30 days per month.) Management is currently targeting two areas for sustainability projects: laundry and housekeeping. Laundry: Currently, in each hotel room, a small sign is placed beside the bed that informs the hotel guest that the environment will benefit if the guest reuses the linens. The company has experienced some success with the signs; the cost of laundry has decreased slightly over the past several years that the program has been in place. Management is now considering the possibility of giving guests a $0.60 credit on their hotel bill for each day of the stay that the linens in the room are reused rather than laundered. Housekeeping: Management is also evaluating the possibility of expanding sustainability efforts in housekeeping by providing an incentive of a $0.90 credit on the hotel bill for each day the guest opts to skip a daily room cleaning. Monthly Occupancy Total Housekeeping Month Percentage Total Laundry Costs Costs 83 % $ 33,600 $ 80,100 January February 88 % $ 31,400 $ 83,200 March 72 % $ 29,820 $ 79,150 April 58 % $ 24,160 $ 62,370 May 42 % $ 17,070 $ 46,130 June 45 % $ 18,400 $ 48,850 July 50 % $ 21,570 $ 48,360 49 % $ 21,440 $ 47,010 August September 38 % $ 14,975 $ 39,400 October 44 % $ 18,280 $ 43,510 November 47 % $ 20,570 $ 48,210 December 60 % $ 25,220 $ 64,830 To satisfy investors, management only wants to implement programs which are cost effective; that is the benefits of the program must exceed the costs of the programs. Sustainability projects are expected to be cost effective. Requirement 1. Using the high-low method, calculate the cost per guest of laundry per day. (The volume should be the number of room days, which you will have to calculate for each month.) Begin by calculating the number of room days for each month. # of room days January February March April May June July August September HTML October November December (Round your answer to the nearest cent.) The variable cost per guest of laundry per day is $ Requirement 2. Using the high-low method, calculate the cost per guest of housekeeping per day. (Again, the volume should be the number of room days, which you would have calculated for Requirement 1.) cent.) The variable cost per guest of housekeeping per day is $ Requirement 3. Using the high-low method, evaluate the proposal to give guests a $0.60 per day credit for reusing their room linens. Does it appear to be cost effective to offer this program? This appear to be a cost effective program as the credit for reusing room linens is than the variable cost of laundering the linens. Requirement 4. Using the high-low method, evaluate the proposal to give guests a $0.90 per day credit for skipping housekeeping services. Does it appear to be cost effective to offer this program? This appear to be a cost effective program as the credit for skipping housekeeping services is than the variable cost of laundering the linens. Requirement 5. Using regression analysis, calculate the cost per guest of laundry per day. (Again, the volume should be the number of room days, which you would have calculated for Requirement 1.) (Round The variable cost per guest of laundry per day is $ Requirement 6. Using regression analysis, calculate the cost per guest of housekeeping per day. (Again, the volume should be the number of room days, which you would have calculated for Requirement 1.) cent.) The variable cost per guest of housekeeping per day is $ Requirement 7. Using regression analysis, evaluate the proposal to give guests a $0.60 per day credit for reusing their room linens. Does it appear to be cost effective to offer this program? This appear to be a cost effective program as the credit for reusing room linens is than the variable cost of laundering the linens. Requirement 8. Using regression analysis, evaluate the proposal to give guests a $0.90 per day credit for skipping housekeeping services. Does it appear to be cost effective to offer this program? This appear to be a cost effective program as the credit for skipping housekeeping services is than the variable cost of laundering the linens. Requirement 9. Regarding the two programs, what is your recommendation to management about which program(s) to implement? Provide rationale for your recommendation. credit program(s) should be implemented; cost effective and environmentally conscious program(s) that stakeholders are likely to appreciate
