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 | |
$25,000 per month | ||
Administrative costs | $40,000 per month | |
Housekeeping and supplies | $25,000 per month | $15 per room-night |
Breakfast | $12,000 per month | $8 per breakfast served |
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? Required
- 2. Gina Davis estimates that if Happy Times Hotel decreases the nightly rates to $70, weeknight occupancy 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?
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- Break-even number of guests for a theme park MusicLand Theme Park has an average daily admission price of 60 per guest. The following financial data are available for analysis: Additional operating data indicate that the park averages 24,000 daily guests during the weekdays and 40,000 average daily guests on Saturdays and Sundays. A. Determine the break-even number of guests per day at the theme park. B. How much profit does MusicLand earn on an average weekday? C. How much profit does MusicLand earn on an average weekend day? D. Determine the revised break-even if the daily fixed costs increased to 1,000,000. E. Would the theme park still remain profitable for an average weekday under the scenario in (d)?arrow_forwardComfort Plus, Inc., has a hotel with 300 rooms in a metropolitan city. Its main competitor, Connors Hotel, has a hotel with 350 rooms in the same city. The following operating data are available for April for the two hotels: a. Determine the guest nights for each hotel in April. b. Determine the available room nights for each hotel in April. c. Determine the occupancy rate for each hotel in April. d. Which hotel has the better utilization of capacity in April?arrow_forwardMarkson and Sons leases a copy machine with terms that include a fixed fee each month plus acharge for each copy made. Markson made 9,000 copies and paid a total of $480 in January. In April, they paid $320 for 5,000 copies. What is the variable cost per copy if Markson uses the high-low method to analyze costs?arrow_forward
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