1. You are GM and running a hotel with 325 rooms that were recently completed a major renovation. The owner who had just spent millions of dollars on renovation expressed that the fixed cost that she has to pay for 10 years beginning of next year would be $30 million per year. To get a reasonable return, she believes ADR to be $450 on average. Over the years of your tenure as GM of the hotel, ADR was $399 and variable cost per room was $75. You estimated that next year occupancy would be 78% Answer the following questions and show your calculation steps of each question.

   1. Calculate breakeven sales

   2. Breakeven room rate

   3. Desired sales

   4. Estimated profit for the owner when rooms are sold at $450

   5. Is the owners expectation reasonable?

2. You are RM analyst at a wholesales travel agency. The owner of the agency has asked you to perform a target profit pricing analysis on a 7-day all-inclusive tour in August in South Florida, which it is going to appeal to affluent Chinese middle class travelers. The agency pays $57,000 fixed expense a month. The average variable cost percentage of the industry for an all-inclusive tour is 70%. (Assume that there is no other package tour planned in December).

   1. Calculate Breakeven Sales for the proposed tour.

   2. The local retail travel agency partners in China estimated that they can bring a

      minimum of 90 tourists. Assuming that this package tour is sold only once in

      December, then what is the breakeven tour price per person?

   3. The owner wants 40% profit margin. Calculate the desired tour price.

3. You are RM analyst at an event production company. The owner of the company asked you to perform a pricing analysis of a Sake tasting event in August in South Florida, which is going to target not only local residents, but also travelers in South Florida. The company pays $127,000 fixed expense a month. The average variable cost percentage of alcohol beverage tasting event is 22%. (Assume that this even is only the event that the company has planned on producing once a year).

   1. Calculate Breakeven Sales for the proposed event.

   2. You estimated that there would be a minimum of 1,000 attendees. Then what is the

      breakeven ticket price per person?

   3. The owner wants 45.73% profit margin out of each ticket. Calculate the desired ticket

      price.