Jason Blodgett is the managing partner of a business that has just finished building a 60-room motel. Blodgett anticipates that he will rent these rooms for 12,000 nights next year (or 12,000 room-nights). All rooms are similar and will rent for the same price. Blodgett estimates the following operating costs for next year. B (Click the icon to view the operating costs.) (Click the icon to view additional information.) Read the requirements Requirement 1. What price should Blodgett charge for a room-night? What is the markup as a percentage of the full cost of a room-night? Begin by selecting the formula, then enter the amounts and solve for the room price per night. Price per room-night per room-night What is the markup as a percentage of the full cost of a room-night? (Enter the markup as a percentage, X%.) ( Markup as a % of full cost % markup Requirement 2. Blodgett's market research indicates that if the price of a room-night determined in Requirement 1 is reduced by 5%, the expected number of room-nights Blodgett could rent would increase by 5%. Should Blodgett reduce prices by 5%? Show your calculations. Begin by calculating the new contribution margin which will help you make your decision. Select the formula first, then enter the amounts to calculate the contribution margin. (Round the new price per room to two decimal places. Round the contribution margin to the nearest dollar.) ( = New contribution margin ) Should Blodgett reduce prices by 5%? Because the contribution margin at the reduced price is the original contribution margin at the selling price you calculated in requirement 1, Blodgett V reduce the price of the rooms. Data table Requirements More info $ 3 per room-night Variable operating costs Fixed costs Salaries and wages Maintenance of building and pool Other operating and administration costs The capital invested in the motel is $1,040,000. The partnership's target return on investment is 30%. Blodgett expects demand for rooms to be uniform throughout the year. He plans to price the rooms at full cost plus a markup on full cost to earn the target return on investment. 1. What price should Blodgett charge for a room-night? What is the markup as a percentage of the full cost of a room-night? 2. Blodgett's market research indicates that if the price of a room-night determined in requirement 1 is reduced by 5%, the expected number of room-nights Blodgett could rent would increase by 5%. Should Blodgett reduce prices by 5%? Show your calculations. $ 174,000 48,000 222,000 $ 444,000 Total fixed costs Print Done Print Done