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Problem 2. Ada Hotel sells two room tpes: standard rooms and deluxe rooms. Average daily rate (ADR) and variable costs (VC) of the two room
Problem 2. | |||||||
Ada Hotel sells two room tpes: standard rooms and deluxe rooms. Average daily rate (ADR) and variable costs (VC) of the two room types are provided in the table below: (Hint: Treat two room types as two different products.) | |||||||
ADR ($) | Variable Cost ($) | ||||||
Standard rooms | 461.20 | 299.78 | |||||
Deluxe rooms | 737.92 | 427.99 | |||||
The Mock Hotel's fixed costs for a month is = = | 295168 | ||||||
Sales mix (contribution of each room type to total room revenue) of the hotel is: | |||||||
Deluxe rooms | 77% | ||||||
Standard rooms | 23% | ||||||
Required: | |||||||
Using the information provided above, answer the following questions: | |||||||
a. What is the break-even room nights (number) for the the hotel given the sales mix of the two room packages? | |||||||
b. What must be the room revenue for the hotel to make a profit of $50,000 a month? | |||||||
c. If the hotel is considering an advertisement campaign for its rooms with a cost $5,000, hom much in room revenue should be generated to cover this extra cost? |
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