Randy is a manager of a business that has completed building a 50-room hotel. Randy believes that the rooms will be rented for 12,500 nights next year (12,500 room nights). All rooms should be rented for the same price. Randy estimates the following operating expenses for next year.

Variable operating costs $4 per room night.

Fixed Costs
Salaries	$200,000
Maintenance	$40,000
Other Operating Costs	$135,000
Total Fixed Costs	$375,000

The capital invested in the hotel is $2,000,000. The companys target return on investment is 15%. Randy expects the demand for rooms to be uniform during the year. He plans to price the room rental at full cost plus a markup on full cost to earn the target return on investment.

What price should be charged for a room night?

Randys market research indicates that if the price of a room night computed in requirement 1 is decreased by $8, the expected number of room nights that would be rented would increase by 10%. Should the price of a room night be decreased by $8? Please show computations to support your answer.