Question
Grand Garden is a hotel with 220 suites. Its regular suite price is $220 per night per suite. The hotel's total cost per night is
Grand Garden is a hotel with 220 suites. Its regular suite price is $220 per night per suite. The hotel's total cost per night is $150 per suite and consists of the following.
Variable cost | $ 110 |
---|---|
Fixed cost | 40 |
Total cost per night per suite | $ 150 |
The hotel manager receives an offer to hold the local Bikers' Club meeting at the hotel in March, which is the hotel's slow season with a low occupancy rate per night. The Bikers' Club would reserve 180 suites for one night if the hotel accepts a price of $118 per night. (a) What is the contribution margin from this special offer? (b) Should the Bikers' Club offer be accepted or rejected?
Revenues from special offer
Variable costs
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started