Super 8, the world's largest budget hotel chain, was founded in 1972. It now has more than 120,000 rooms in more than 2,000 locations (average is 61 rooms) in the United States and Canada. Suppose a particular Super 8 has annual fixed cost of $900,000 for its 100-room motel, average daily room rents of $54, and average variable cost of $9 for each room rented. It operates 365 days per year. 1. How much net income on rooms will Super 8 generate (a) if the motel is completely full throughout the entire year and (b) if the motel if half full? 2. Compute the break even-point in number of rooms rented. What percentage occupancy for the year is needed to break even?
Super 8, the world's largest budget hotel chain, was founded in 1972. It now has more than 120,000 rooms in more than 2,000 locations (average is 61 rooms) in the United States and Canada. Suppose a particular Super 8 has annual fixed cost of $900,000 for its 100-room motel, average daily room rents of $54, and average variable cost of $9 for each room rented. It operates 365 days per year. 1. How much net income on rooms will Super 8 generate (a) if the motel is completely full throughout the entire year and (b) if the motel if half full? 2. Compute the break even-point in number of rooms rented. What percentage occupancy for the year is needed to break even?
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter8: Tactical Decision-making And Relevant Analysis
Section: Chapter Questions
Problem 54P
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Super 8, the world's largest budget hotel chain, was founded in 1972. It now has more than 120,000 rooms in more than 2,000 locations (average is 61 rooms) in the United States and Canada. Suppose a particular Super 8 has annual fixed cost of $900,000 for its 100-room motel, average daily room rents of $54, and average variable cost of $9 for each room rented. It operates 365 days per year. 1. How much net income on rooms will Super 8 generate (a) if the motel is completely full throughout the entire year and (b) if the motel if half full? 2. Compute the break even-point in number of rooms rented. What percentage occupancy for the year is needed to break even?
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