Problem 2. Ada Hotel sells two room tpes: standard rooms and deluxe rooms. Average daily rate (ADR)...

Problem 2.
Ada Hotel sells two room tpes: standard rooms and deluxe rooms. Average daily rate (ADR) and variable costs (VC) of the two room types are provided in the table below: (Hint: Treat two room types as two different products.)

	ADR ($)	Variable Cost ($)
Standard rooms	461.20	299.78
Deluxe rooms	737.92	427.99


The Mock Hotel's fixed costs for a month is = =		295168
Sales mix (contribution of each room type to total room revenue) of the hotel is:

Deluxe rooms	77%
Standard rooms	23%

Required:
Using the information provided above, answer the following questions:
a. What is the break-even room nights (number) for the the hotel given the sales mix of the two room packages?
b. What must be the room revenue for the hotel to make a profit of $50,000 a month?
c. If the hotel is considering an advertisement campaign for its rooms with a cost $5,000, hom much in room revenue should be generated to cover this extra cost?

Expert Solution

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

ekkarill92 answered 2 years ago

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