Manufacturing overhead	Amount	Cost driver	Standard Guest Room	Junior Suite	Presidential Suite
						Depreciation	$3,200,000	Square feet	50,000	30,000	30,000
Maintenance	$1,800,000	Direct labor hours	180,000	143,000	148,500
						Purchasing	$320,000	# of purchase orders	2,500	1,500	9,000
												Inspection	$850,000	# of inspections	1,000	850	3,500
Indirect	$490,000	Units manufactured	150	110	25
materials
Supervision	$1,700,000	# of inspections	1,000	850	3.5
Supplies	$190,000	Units manufactured	150	110	25

6. Why are the costs different between the traditional method and the activity-based method?

7. At the current selling price, is the company covering its true cost of production of the Presidential Suite? Briefly discuss.

8. What should price should Choice Hotels charges for the Presidential Suite?

9. Assume that the Presidential Suite has the same profit margin as the Standard Guest Room. What should its selling price be? Show all calculations.

10. What should Choice Hotels do if the quantity of the Presidential Suite Guest Rooms sold at the new price falls to 10 per year?

11. What should Choice Hotels do if the price of the Presidential Suite cannot exceed $1,050,000?

12. At a selling price of $1,050,000 each, what is the breakeven unit volume for the Presidential Suite?

13. What are the lessons learned from this case?