F#4

Peak

Luxury Resorts has been evaluating how it might expand its sustainability efforts in its hotels.

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(Click the icon to view additional information.)Read the requirements.

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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:

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(Click the icon to view the costs and occupancy data )

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

(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.) (Round your answer to the nearest 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

$0.90

per day credit for reusing their room linens. Does it appear to be cost effective to offer this program?This

doesdoes

does notdoes not

appear to be a cost effective program as the credit for reusing room linens is

moremore

lessless

than the variable cost of laundering the linens.Requirement 4. Using the high-low method, evaluate the proposal to give guests a

$1.10

per day credit for skipping housekeeping services. Does it appear to be cost effective to offer this program?This

doesdoes

does notdoes not

appear to be a cost effective program as the credit for skipping housekeeping services is

lessless

moremore

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 your answer to the nearest cent.)

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.) (Round your answer to the nearest cent.)

The variable cost per guest of housekeeping per day is

.

Requirement 7. Using regression analysis, evaluate the proposal to give guests a

$0.90

per day credit for reusing their room linens. Does it appear to be cost effective to offer this program?This

does notdoes not

doesdoes

appear to be a cost effective program as the credit for reusing room linens is

moremore

lessless

than the variable cost of laundering the linens.Requirement 8. Using regression analysis, evaluate the proposal to give guests a

$1.10

per day credit for skipping housekeeping services. Does it appear to be cost effective to offer this program?This

does notdoes not

doesdoes

appear to be a cost effective program as the credit for skipping housekeeping services is

lessless

moremore

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 the rationale for your recommendation.

The housekeeping

Both the laundry and housekeeping

The laundry

credit program(s) should be implemented;

the laundry program is a

the housekeeping program is a

both are

cost effective and environmentally conscious program(s) that stakeholders are likely to appreciate.

More info

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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

Cool

Peak

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

$0.90

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

$1.10

credit on the hotel bill for each day the guest opts to skip a daily room cleaning.

Data table

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Month	Monthly Occupancy Percentage	Total Laundry Costs	Total Housekeeping Costs
January	73%	$29,544	$70,449
February	80%	$32,391	$84,852
March	71%	$29,403	$78,049
April	60%	$24,987	$64,511
May	50%	$20,318	$54,913
June	53%	$21,661	$57,524
July	58%	$25,011	$56,092
August	57%	$24,929	$54,679
September	39%	$17,100	$46,800
October	51%	$21,185	$50,422
November	54%	$23,632	$55,385
December	61%	$25,636	$65,910

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.