PROBLEM P4-1 - Cost Behavior

Hotel Majestic is interested in estimating fixed and variable costs so that the company can make more accurate projections of costs and profit.The hotel is in a resort area that is particularly busy from November through February. In July and August, however, the hotel has only a 50 percent occupancy rate.

Required

Classify each of the following costs as fixed (F), variable (V), or mixed (M) with respect to the number of hotel guests per month:

a. Depreciation of the building

b. Salaries of restaurant staff

c. Salaries of administrative staff (hotel manager, desk clerks, accountants, etc.)

d. Soap, shampoo, and other toiletries in rooms '

e. Laundry costs (cost of linens, cleaning products, depreciation of laundry equipment, etc.)

f. Food and beverage costs

g. Grounds maintenance