Dramatic Ridge Luxury Resorts has been evaluating how it might To evaluate these options, management has gathered data for expand its sustainability efforts in its hotels. the past year for its laundry costs and housekeeping costs. The (Click the icon to view additional information.) costs and occupancy data include: |(Click the icon to view the costs and occupancy data ) Read the requirements.. 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 October November December 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.) 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.) 3. Using the high-low method, evaluate the proposal to give guests a $0.70 per day credit for reusing their room linens. Does it appear to be cost effective to offer this program? 4. Using the high-low method, evaluate the proposal to give guests a $1.40 per day credit for skipping housekeeping services. Does it appear to be cost effective to offer this program? 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.) 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.) 7. Using regression analysis, evaluate the proposal to give guests a $0.70 per day credit for reusing their room linens. Does it appear to be cost effective to offer this program? 8. Using regression analysis, evaluate the proposal to give guests a $1.40 per day credit for skipping housekeeping services. Does it appear to be cost effective to offer this program? 9. Regarding the two programs, what is your recommendation to management about which program(s) to implement? Provide the rationale for your recommendation. In any given month, an average of 109,500 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 Dramatic Ridge 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 $0.70 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 $1.40 credit on the hotel bill for each day the guest opts to skip a daily room cleaning. Monthly Occupancy Percentage Total Laundry Costs Total Housekeeping Costs Month 85% $ 37,339 $ 146,456 January February 79% $ 40,020 $ 140,540 March 70% $ 35,800 $ 137,180 121,430 63% $ 30,010 $ April May 52% $ 25,960 $ 103,870 90,610 June 48% $ 56% $ 108,190 25,360 $ 28,240 $ 25,230 $ 24,730 $ 50% July August September October $ 85,850 80,400 46% $ 40% $ 75,500 November 52% $ 19,600 $ 26,800 $ 32,000 $ 105,040 December 61% $ 113,090 To satisfy investors, management only wants to implement programs that 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
