Skyview Manor Case
ACC 5850
Skyview Manor Case
1. On average, how many rooms must be rented each night in season for the hotel to break even?
Variable Costs: Cleaning Supplies $1,920 Linen Service $13,920 ½ Misc Expenses $3,657 $19,497 (Total Variable Cost)
Variable Cost per Occupied Room Night: = =$2.54.
Contribution Margin: Average Revenue = = $20.94 Contribution Margin = Revenue – Variable Cost = $20.94 – $2.54 = 18.40.
Fixed Costs: = Total Costs – Variable Costs = $138,410 - $19,497 = $118,913.
Break Even: =. Per night: = = 54 rooms.
54 rooms on average (or 67.3% occupancy) must be rented each night in season for the hotel to break even.
2. The hotel is full on weekends in the ski season. If all room rates were raised to $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?
Subtracted Contribution Margin: Weekend nights = 120 * = 34 Subtracted CM = 8 rooms * 34 weekend nights * $18.40 = $5,005.
Added Contribution Margin: = 72 rooms * 34 weekend nights * $5.00 = $12,240.
Net Change in Contribution Margin: = $12,240 - $5,005 = $7,235 added profit before tax.
Revised Profit before tax: = $22,390 + $7,235 = $29,625
3. What is the proposed incremental contribution margin per occupied room/day during the off-season?
Cleaning Supplies = = = 0.25 per room occupied.
Linen Service Equivalent Days: Singles: ( * 1 * 7,680) = 1,536. Doubles: ( * 2 * 7,680) = 12,288 13, 824 Total Linen Cost = = 1.01 per equivalent day per single room (20% occupancy) 2.02 per double room (80% occupancy)
Misc. Expenses (room supplies) ($7,314 * 0.5) / 7,680 = $0.48 per occupied room
Revenues Single = $10, and Double = $15
Contribution Margin:
Single: $10 – (0.25 + 1.01 + 0.48) = $10 - $1.74 = $8.26
Double: $15 – (0.25 + 2.02 + 0.48) = $15 - $2.75 = $12.25
Weighted
Skyview Manor Case
1. On average, how many rooms must be rented each night in season for the hotel to break even?
Variable Costs: Cleaning Supplies $1,920 Linen Service $13,920 ½ Misc Expenses $3,657 $19,497 (Total Variable Cost)
Variable Cost per Occupied Room Night: = =$2.54.
Contribution Margin: Average Revenue = = $20.94 Contribution Margin = Revenue – Variable Cost = $20.94 – $2.54 = 18.40.
Fixed Costs: = Total Costs – Variable Costs = $138,410 - $19,497 = $118,913.
Break Even: =. Per night: = = 54 rooms.
54 rooms on average (or 67.3% occupancy) must be rented each night in season for the hotel to break even.
2. The hotel is full on weekends in the ski season. If all room rates were raised to $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?
Subtracted Contribution Margin: Weekend nights = 120 * = 34 Subtracted CM = 8 rooms * 34 weekend nights * $18.40 = $5,005.
Added Contribution Margin: = 72 rooms * 34 weekend nights * $5.00 = $12,240.
Net Change in Contribution Margin: = $12,240 - $5,005 = $7,235 added profit before tax.
Revised Profit before tax: = $22,390 + $7,235 = $29,625
3. What is the proposed incremental contribution margin per occupied room/day during the off-season?
Cleaning Supplies = = = 0.25 per room occupied.
Linen Service Equivalent Days: Singles: ( * 1 * 7,680) = 1,536. Doubles: ( * 2 * 7,680) = 12,288 13, 824 Total Linen Cost = = 1.01 per equivalent day per single room (20% occupancy) 2.02 per double room (80% occupancy)
Misc. Expenses (room supplies) ($7,314 * 0.5) / 7,680 = $0.48 per occupied room
Revenues Single = $10, and Double = $15
Contribution Margin:
Single: $10 – (0.25 + 1.01 + 0.48) = $10 - $1.74 = $8.26
Double: $15 – (0.25 + 2.02 + 0.48) = $15 - $2.75 = $12.25
Weighted