Fixed Cost Variable Cost Depreciation Administrative costs $25,000 per month $40,000 per month $25,000 per month $12,000 per month Housekeeping and supplies $15 per room-night S8 per breakfast served Breakfast Happy Times Hotel offers free breakfast to guests. In June, there are an average of two breakfasts served per room-night on weeknights and four breakfasts served per room-night on weekend nights. 1. What was Happy Times Hotel's operating income or loss for the month? 2. Gina Davis estimates that if Happy Times Hotel decreases the nightly rates to $70, weeknight occu- pancy will increase to 80%. She also estimates that if the hotel increases the nightly rate on weekend nights to $100, occupancy on those nights will remain at 90%. Would this be a good move for Happy Times Hotel? Show your calculations. 3. Why would Happy Times Hotel have a $30 price difference between weeknights and weekend nights? 4. A discount travel clearinghouse has approached Happy Times Hotel with a proposal to offer last-minute deals on empty rooms on both weeknights and weekend nights. Assuming that there will be an average of three breakfasts served per night per room, what is the minimum price that Happy Times Hotel could accept on the last-minute rooms? Required

Question

Considerations other than cost in pricing decisions. Happy Times Hotel operates a 100-room hotel near a busy amusement park. During June, a 30-day month, Happy Times Hotel experiences a 70% occupancy rate from Monday evening through Thursday evening (weeknights). On Friday through Sunday evenings (weekend nights), however, occupancy increases to 90%. (There were 18 weeknights and 12 weekend nights in June.) Happy Times Hotel charges $80 per night for a suite. The company recently hired Gina Davis to manage the hotel to increase the hotel’s profitability. The following information relates to Happy Times Hotel’s costs:

Fixed Cost
Variable Cost
Depreciation
Administrative costs
$25,000 per month
$40,000 per month
$25,000 per month
$12,000 per month
Housekeeping and supplies
$15 per room-night
S8 per breakfast served
Breakfast
Happy Times Hotel offers free breakfast to guests. In June, there are an average of two breakfasts served
per room-night on weeknights and four breakfasts served per room-night on weekend nights.
1. What was Happy Times Hotel's operating income or loss for the month?
2. Gina Davis estimates that if Happy Times Hotel decreases the nightly rates to $70, weeknight occu-
pancy will increase to 80%. She also estimates that if the hotel increases the nightly rate on weekend
nights to $100, occupancy on those nights will remain at 90%. Would this be a good move for Happy
Times Hotel? Show your calculations.
3. Why would Happy Times Hotel have a $30 price difference between weeknights and weekend nights?
4. A discount travel clearinghouse has approached Happy Times Hotel with a proposal to offer last-minute
deals on empty rooms on both weeknights and weekend nights. Assuming that there will be an average
of three breakfasts served per night per room, what is the minimum price that Happy Times Hotel could
accept on the last-minute rooms?
Required
Expand
Transcribed Image Text

Fixed Cost Variable Cost Depreciation Administrative costs $25,000 per month $40,000 per month $25,000 per month $12,000 per month Housekeeping and supplies $15 per room-night S8 per breakfast served Breakfast Happy Times Hotel offers free breakfast to guests. In June, there are an average of two breakfasts served per room-night on weeknights and four breakfasts served per room-night on weekend nights. 1. What was Happy Times Hotel's operating income or loss for the month? 2. Gina Davis estimates that if Happy Times Hotel decreases the nightly rates to $70, weeknight occu- pancy will increase to 80%. She also estimates that if the hotel increases the nightly rate on weekend nights to $100, occupancy on those nights will remain at 90%. Would this be a good move for Happy Times Hotel? Show your calculations. 3. Why would Happy Times Hotel have a $30 price difference between weeknights and weekend nights? 4. A discount travel clearinghouse has approached Happy Times Hotel with a proposal to offer last-minute deals on empty rooms on both weeknights and weekend nights. Assuming that there will be an average of three breakfasts served per night per room, what is the minimum price that Happy Times Hotel could accept on the last-minute rooms? Required

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Cost Accounting

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Define the following terms.(a) Basic earnings per share.(b) Potentially dilutive security.(c) Dilute...

A: Earnings per cash:  The amount available as earnings for each of the common shares outstanding for a...

Q: On January 1, 2016, Rapid Airlines issued $200 million of its 8% bonds for $184 million. The bonds w...

A: 1. Prepare journal entry to record interest on June 30, 2016.

Q: Analyzing and journalizing bond transactions On January 1, 2018, the Doctors Credit Union (DCU) issu...

A: Requirement 1:If the market interest rate is 5% when DCU issues its 7% bonds, the bonds will be pric...

Q: Corporations offer the advantage of limited liability. Explain what is meant by that statement.

A: Corporation: A business concern where there is a separate legal entity, and are owned by shareholder...

Q: Briefly describe the conceptual basis for asset and liability recognition under the right-of-use app...

A: LeaseLease is a contractual agreement whereby the right to use an asset for a particular period of t...

Q: Earnings per share can affect market prices of commonstock. Can market prices affect earnings per sh...

A: Click to see the answer

Q: State how each of the following items is reflected in thefinancial statements.(a) Change from FIFO t...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: Southern Atlantic Distributors began operations in January 2016 and purchased a delivery truck for $...

A: 1. 

Q: Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the ...

A: Specific citation for accounting treatment For every accounting items, there is a specific citation ...

Q: You have been hired as the new controller for the Ralston Company. Shortly after joining the company...

A: Inventory errorInventory errors are sometimes caused by making mistake in physical count, in pricing...

Q: Describe the process of correcting an error when it’s discovered in a subsequent reporting period.

A: Correcting an error: Error correction is an adjustment to previously issued financial statements. It...

Q: On December 12, 2016, an investment costing $80,000 was sold for $100,000. The total of the sale pro...

A: The error got rectified by passing the rectification entry in which cash is debited on account of sa...

Q: Hamilton Boats issued 175,000 shares of its no par common stock to Sudoku Motors in exchange for 1,0...

A: Common stock: These are the ordinary shares that a corporation issues to the investors in order to r...

Q: Special order, short-run pricing. Diamond Corporation produces baseball bats for kids that it sells ...

A: 1. 

Q: I need help

A: Working note:Calculate the cost of food used.

Q: Allocating Selling and Administrative Expenses using Activity-Based CostingShrute Inc. manufactures ...

A: Requirement 1:

Q: The Gorman Group issued $900,000 of 13% bonds on June 30, 2016, for $967,707. The bonds were dated o...

A: 1.

Q: Single Plantwide Factory Overhead RateSpotted Cow Dairy Company manufactures three products—whole mi...

A: 1. Compute single plantwide factory overhead rate using direct labor hours as allocation base as sho...

Q: How does the Model Business Corporation Act affect the way corporations operate?

A: Corporation: A business concern where there is a separate legal entity, and are owned by shareholder...

Q: Companies are required to transfer “other comprehensive income” each period to shareholders’ equity....

A: Comprehensive income:Comprehensive income represents the amount of net income plus other comprehensi...

Q: When is revenue recognized in the following situations?(a) Revenue from selling products, (b) revenu...

A: Click to see the answer

Q: Units of production data for the two departments of Atlantic Cable and Wire Company for July of the ...

A: Equivalent units of production refer to the work done on the units at the end of an accounting perio...

Q: Using IFRS, how should prior period errors that are discovered in a subsequent reporting period be r...

A: IFRS: They are commonly known as IFRS. It is a set of accounting standards which are developed by in...

Q: Closing down divisions. Ainsley Corporation has four operating divisions. The budgeted revenues and ...

A: Workings:

Q: When does a company satisfy a performance obligation?Identify the indicators of satisfaction of a pe...

A: Performace obligation gets satisfied only when the ownership of the goods are transferred to the cus...

Q: For the year ended December 31, 2016, Fidelity Engineering reported pretax accounting income of $977...

A: Deferred Tax Deferred tax is an amount i.e. computed on the basis of tax liability on the income as ...

Q: American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton ...

A: 1.Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2...

Q: At the end of the year, the deferred tax asset account had a balance of $12 million attributable to ...

A: Click to see the answer

Q: What effect do stock dividends or stock splits have on thecomputation of the weighted-average number...

A: Stock split and stock dividend: Stock dividend refers to a distribution of stock of the company to t...

Q: What are the reporting issues in a sale with a repurchaseagreement?

A: Repurchase agreement: A form of short term borrowing for dealers in government securities is called ...

Q: Make or buy, unknown level of volume. (A. Atkinson, adapted) Denver Engineering manufactures small e...

A: Opportunity Cost:Opportunity cost is total of potential income and other benefits that are lost due ...

Q: Below are three independent and unrelated errors. a. On December 31, 2015, Wolfe-Bache Corporation f...

A: a. (1) Identify the effect of each error on the income statement and the balance sheet in the year 2...

Q: Direct Assurance Company revised the estimates of the useful life of a trademark it had acquired thr...

A: Click to see the answer

Q: Cable Network System Bhd (CNS) is a supplier of equipment to telecommunication companies such as Max...

A: Hey, since there are multiple sub parts posted, we will answer first three subparts alone.

Q: Determine the meaning of the following terms.(a) Contributory plan.(b) Vested benefits.(c) Retroacti...

A: Plan assets: Assets which are created, maintained and planned for a specific purpose or benefit is t...

Q: Analysis of growth, price-recovery, and productivity components (continuation of 12-21 and 12-22). R...

A: Click to see the answer

Q: American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation. Barto...

A: 1.

Q: In 2016, DFS Medical Supply collected rent revenue for 2017 tenant occupancy. For income tax reporti...

A: A journal entry is prepared by the company to record the non-economic & economic transactions of...

Q: When a company records a deferred tax asset, it may need to also report a valuation allowance if it ...

A: 1.FASB ASC 740-10-30-17 citation named as “Income Taxes–Overall–Initial Measurement Establishment of...

Q: Additional disclosures are required pertaining to deferred tax amounts reported on the balance sheet...

A: Click to see the answer

Q: A new staff accountant for the McCollum Corporation recorded the following journal entries during th...

A: Prepare the journal entries to record the given transactions:Record the donated assets received by M...

Q: Explain the importance of a contract in the revenue recognitionprocess.

A: Click to see the answer

Q: Explain a principal-agent relationship and its significanceto revenue recognition.

A: Click to see the answer

Q: In previous years, Cox Transport reacquired 2 million treasury shares at $20 per share and, later, 1...

A: Click to see the answer

Q: Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled a...

A: 1.