Question
The Tired Traveler Motel rents rooms for $50 per night. The variable cost per room rental is $10. The company incurs $300,000 of fixed costs
The Tired Traveler Motel rents rooms for $50 per night. The variable cost per room rental is $10. The company incurs $300,000 of fixed costs per year. The company expects to rent 10,000 rooms in the coming year. a. Based on these data, prepare a static budget for the coming year. b. Holding all other factors constant, how would net income differ from the static budget if sales price was 10 percent lower than expected? c. Holding all other factors constant, how would net income differ from the static budget if sales volume (number of room rentals) was 10 percent lower than expected? d. Holding all other factors constant, how would net income differ from the static budget if variable costs were 10 percent higher than expected? e. Holding all other factors constant, how would net income differ from the static budget if fixed costs were 10 percent higher than expected? f. Which scenario (b, c, d, or e) would result in the lowest net income?
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