Question 9

(a) 100-room budget hotel usually rents out its rooms in the following proportions:

50% singles @ $80

25% doubles @ $90

25% triples @ $100

Variable costs averaged $30 per occupied room. Annual fixed costs are $1,000,000.

(i) Calculate the hotel's average room rate (that is, the blended rate from singles, doubles and triples) based on 60 rooms sold.

(ii) Calculate the hotel's breakeven occupancy percentage.

(iii) Calculate the occupancy percentage that will give an operating income (before tax) of $200,000 per year.

(iv) Calculate the occupancy percentage that will give an operating income (before tax) of $180,000 per year if the average room rate decreased by 10% and variable costs increased by 10%.

(b) The budget hotel has the following breakdown of its room revenue and wages in the rooms department:

	Room Revenue ($)	Wage Costs ($)
January	48,900	22,700
February	48,300	22,300
March	51,300	22,500
April	48,500	22,900
May	68,100	26,500
June	92,500	37,300
July	106,700	38,400
August	88,100	32,300
September	68,500	30,300
October	60,900	25,700
November	56,500	22,500
December	54,100	26,100

Calculate the variable cost as a percentage per dollar of room revenue using the High-Low method.