Question

16. Determine the gross room rate if the Gross Room Rate increases by 15% in year 2 (round to two decimal points).

	YEAR 1	YEAR 2
Gross Room Rate	$245.00	$ ___
Direct Costs (35% of GRR)	$85.75
Net Room Rate	$159.25
Expenses (Fixed)	$60.00
Net Profit	$99.25
Profit Margin	40.51%

17 .Please refer to the table in question 16, calculate the direct costs in year 2 if the Gross Room Rate increases by 15% (round to two decimal points).

18.Please refer to the table in question 16, calculate the net room rate in year 2 if the Gross Room Rate increases by 15% (round to two decimal points).

19.Please refer to the table in question 16, calculate the fixed expenses in year 2 if the Gross Room Rate increases by 15% (round to two decimal points).

20. Please refer to the table in question 16, calculate the net profit in year 2 if the Gross Room Rate increases by 15% (round to two decimal points).

21. Please refer to the table in question 16, calculate the Profit Margin in year 2 if the Gross Room Rate increases by 15% (round to two decimal points).

Answer 1

S.No	Particulars	Year 1	Year 2
A	Gross Room Rate	$245	281.75*
B	Direct Cost ( A*35%)	$85.75	$98.61
C	Net Room Rate	$159.25	$183.14
D	Expenses ( Fixed)	$60	$60.00
E	Net Profit( C-D)	$99.25	$123.14
F	Profit Marginin %( E/A*100)	40.51	$43.70
	( Calculation)	( $ 99.25/$ 245*100)	( $ 123.14/$ 281.75*100)

* Groom Rate in year 2 = Groom Rate in year 1 + 15% growth rate

= $ 245+ $ 245*15%

= $ 245+$36.75

= $ 281.75

Hence Groom rate in year 2 is $ 281.75

17) Direct Cost in year 2 = Groom rate in year 2 * 35%

= $ 281.75*35%

= $ 98.61

Hence the Direct cost in year 2 is $ 98.61

18) Net Room rate in year 2 = Gross room rate - Direct Cost

= $ 281.75-$ 98.61

= $ 183.14

Hence Net room rate in year 2 is $ 183.14

19) Since fixed Expenses remain Constant , it does not vary with sale price.so year 2 fixed expense is $ 60

20) Net Profit in year 2 = Net Room rate - Fixed expenses

= $ 183.14-$ 60

= $ 123.14

Hence Net Profit in year 2 is $ 123.14

21) Net Profit Margin in year 2 = Net Profit /Gross Room rate *100

= $ 123.14/$ 281.75*100

= $ 43.7054

Hence the Net Profit Margin is 43.7054%

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