• The following information is for Winter Break Hotel. Given the information, questions from #14 to #16.
o Average room selling price: $65
o Average variable cost per room: $17
o Annual total fixed costs: $450,000
o Sales goal (= Net Income) of the hotel this year: $5,000,000
o Number of rooms available per day: 400 rooms
o This hotel is open 365 days a year.

What is the occupancy percentage required to reach the sales goal? (Round to the second decimal place.)

A. 23.43%

B. 9.46%

C. 23.65%

D. 77.77%

For every $1 of sales, how much can this hotel use to pay on fixed costs or to generate profits?

A. $2.82

B. $.82

C. $.26

D. $.74

If this hotel experiences an increase in its fixed cost by $35,000 this year, how many additional rooms must be sold to absorb this increase? (Round up to the nearest whole number.)

A. 730 rooms

B. 21,722 rooms

C. 727 rooms

D. 11,667 rooms

(Please answer sub parts: A, B)

The student population at the state college consists of 55% females and 45% males.

A. The college theater department recently staged a production of a modern musical. A researcher
recorded the gender of each student entering the theater and found a total of 385 females and 215 males. Is the gender distribution for theater goers significantly different from the distribution for the general college? (Test at the .05 significance level using CV = 3.84).

B. The same researcher also recorded the gender of each student watching a men’s basketball game in the college gym and found a total of 83 females and 97 males. Is the gender distribution for basketball fans significantly different from the distribution for the general college? (Test at the .05 significance level
using CV = 3.84).

To conduct an experiment, a movie theater increased movie ticket prices from $9 to $10 and measured the change in ticket sales. The theater then gathered data over the following month to determine whether the price increase was profitable. Assume total costs to the theater are the same, whether the price of a ticket is $9 or $10.

In order for the ticket price to have been profitable over the month, the elasticity of demand for movie tickets must be (INELASTIC OR ELASTIC) .

Demand curves become (MORE OR LESS) elastic in the long run. This means that the ticket price increase will likely be (MORE OR LESS) profitable in the long run.

Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $32,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,000 per year. The rooms rent at an average price of $60 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and the cost of food which is $5 per person per night.

Instructions (a) Determine the number of rentals and the sales revenue Jane needs to break even using the contribution margin technique.

(b) If the current level of rentals is 3,500, by what percentage can rentals decrease before Jane has to worry about having a net loss?

(c) Jane is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3 for food costs per person per night. Jane feels she can increase the room rate to $66 per person per night. Determine the number of rentals and the sales revenue Jane needs to break even if the changes are made.

Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an
annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,000 per year. The rooms rent at an average price of $60 per person per night
including breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and the cost of food which is $5 per person per night.

Instructions:

1. Determine the number of rentals and the sales revenue Jane needs to break even using the contribution margin technique.

2. If the current level of rentals is 4,000, by what percentage can rentals decrease before Jane has to worry about having a net loss?

3. Jane is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3 for food costs per person per night. Jane feels she
can increase the room rate to $68 per person per night. Determine the number of rentals and the sales revenue Jane needs to break even if the changes are made.

Q1) Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,600 per year. The rooms rent at an average price of $127 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10.6 per person per night and the cost of food which is $5.8 per person per night.

A) Determine the sales revenue Jane needs to break even.

B) Determine the number of rentals Jane needs to earn a target net income of $50,000.

C) Jane is considering changing the business strategy. She considers installing additional cleaning machines which will decrease laundry and cleaning service per person per night by $3. However, fixed depreciation cost will increase by $4,080. Determine the number of rentals Jane needs to break even if the changes are made.

D) Determine the number of rentals at which Jane would be indifferent between the current and proposed business models. (Hint: Consider net income figures.)

Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,700 per year. The rooms rent at an average price of $128 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10.7 per person per night and the cost of food which is $5.1 per person per night.

A) Determine the sales revenue Jane needs to break even.

B) Determine the number of rentals Jane needs to earn a target net income of $50,000.

C) Jane is considering changing the business strategy. She considers installing additional cleaning machines which will decrease laundry and cleaning service per person per night by $3. However, fixed depreciation cost will increase by $4,010. Determine the number of rentals Jane needs to break even if the changes are made.

D) Determine the number of rentals at which Jane would be indifferent between the current and proposed business models. (Hint: Consider net income figures.)

Amy Richardson had been a well-paid sales manager of a major hotel chain for 15 years. Due to a hotel owner's illness, Amy was offered the opportunity to purchase a hotel near a seaside vacation area she had often visited. After obtaining a lawyer and a financial accountant to assist her, Amy did an analysis of the most recent financial statements of the hotel. Since the hotel had consistently shown a profit during the past few years, Amy thought that the price of the hotel was reasonable, so she decided to purchase the hotel. She resigned her position, obtained a loan, and purchased the hotel.

During the first year as a hotel manager, Amy received an offer from a tour operator who proposed to guarantee a considerable number of room reservations, including during the off-season. However, she turned down the offer because the tour operator asked for a 20% price reduction compared to the regular room rate. A few weeks later, she decided to shut down the restaurant, located in the main building of the hotel, in order to save expenses. With regard to general expenses, she was particularly concerned with the high room cleaning and service costs. On the sales side, although the reservations for the cheaper standard rooms were a bit sluggish, the more expensive large-size superior rooms had a very good occupancy rate of over 90%.

The following year, there was a severe economic downturn and also a very bad weather season that reduced the number of guests and also caused a resulting mold situation in the hotel building that required expensive repair work. Amy ran short of cash, became emotionally distraught, and eventually had to sell the hotel at a significant loss.

Question: Using Relevant Costs To Make Short-Term Decisions explain potential management errors that Amy had made and could have helped her to improve decision-making and the financial results of the business.

Developing an Equation from Average Costs The America Dog and Cat Hotel is a pet hotel located in Las Vegas. Assume that in March, when dog-days (occupancy) were at an annual low of 500, the average cost per dog-day was $14. In July, when dog-days were at a capacity level of 4,000, the average cost per dog-day was $7. (a) Develop an equation for monthly operating costs. (Let X = dog-days per month) Total cost = Answer + Answer * X (b) Determine the average cost per dog-day at an annual volume of 24,000 dog-days.

Donald has recently lost his job as the President of a large North American country and has returned to the family hotel business. Their most prestigious hotel Tramp Tavern has been closed for two years whilst it has undergone refurbishment and the hotel is about to be relaunched. The hotel runs conventionally and has a number of cost centres such as Reception, Concierge, Repairs and Maintenance which are relatively fixed. The hotel also has variable costs relating to cleaning and servicing rooms. You have been provided with the following data regarding the re-furbished Tramp Tavern: Available Rooms 400 Average Room Tariff (per night) $230 Fixed Financing Costs $10 million Fixed Operating Costs $15 million Variable Operating Costs (per night when occupied) $50 Required a) What is the breakeven point (in total room rentals for the year) for the Tramp Tavern? Show the percentage of occupancy that the hotel must achieve in order to break even (show all calculations)