Skyview Manor
Question 1 – On average, how many
rooms must be rented each night in season for the hotel to breakeven?
Calculating the break-even occupancy level requires splitting the
costs in Exhibit 1 into the fixed and variable components:
…..
Question 2 – The hotel is full on
weekends in the ski season. If all room rates were raised $5 on weekend nights,
but occupancy fell to 72 rooms instead of 80, what is the revised profit before
taxes for the year, per Exhibit 1?
The easiest way to make the calculation is
to calculate the change in Contribution Margin (CM) since fixed costs will not
change.
…..
Question 3 –
What is the incremental contribution margin per occupied room/day during the
off-season?
……
Question 5 – For each decision alternative calculate the occupancy
rate necessary to break even on the incremental costs.
……..
Question 6 – What decision alternative do you recommend? Why?
…….
