f you are not familiar with Priceline.com Inc., go to its website. Assume that an individual "names a price" of $85 onwww.priceline.comLinks to an external site.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