Question

Great Eastern Inns has a total of 800 rooms in its chain of motels located in eastern Canada. On average, 55% of the rooms are occupied each day. The company’s operating costs are $39 per occupied room per day at this occupancy level, assuming a 30-day month. This $39 figure contains both variable and fixed cost elements. During February, the occupancy rate dropped to only 45%. A total of $484,800 in operating cost was incurred during February.

Required:

1.	Estimate the variable cost per occupied room per day. (Assume 30 days in a month. Do not round intermediate calculations and round your final answer to 2 decimal places.)

      

2.	Estimate the total fixed operating costs per month.

      

3.	Assume that the occupancy rate increases to 60% during March. What total operating costs would you expect the company to incur during March? (Assume 30 days in a month. Do not round intermediate calculations.)

Answer 1