Question 1 Identify Variable Cost Cleaning Supplies Linen Service 1/2 Misc Expenses Total Variable Cost VC per

Room Night Total Rooms Operating Days Total Room Nights (Capacity Available) Occupancy Rate Occupied Room Nights (Used Capacity) Per Occupied Room Night 80 120 9600 80% 7680 2.54 1920 13920 3657 19497

Contribution Margin Average Revenue Avg Rev - Per Unit Var Cost 20.94 18.40

Fixed Cost Break Even Point Per Night (/120)

Fixed Cost

118913 6463 54

Question 2 When we lose room nights, we are only losing the CM from those room nights, not the revenue as such Lost CM due to Lost Room Nights Rooms Lost on Weekend Days Weekend Days CM per Room Night Lost CM, due to room nights lost 8 34 18.40 5005

Added CM due to raised prices Rooms occupied Weekend Days Added Price (Increase in SP, implying increase in CM since CM = Avg Rev - SP) Added CM due to Price (SP) increase Profit Before Taxes 72 34 5 12240

Difference in CM after the Price Increase New Breakeven Point (The least number of rooms to be occupied) Breakeven Lost Rooms CM Per Room night X*18.40 = (80-X)*5 18.4X=400-5X 18.4X+5X = 400 23.4X = 400 X = 400/23.4 = 17 New Breakeven rooms New least occupancy for breakeven

7235

X 18.4

17 63

The price increase holds good if there are atleast 63 rooms occupied per

Question 3 Additional Expense for just staying open in off season Revenue Single Occupancy Double Occupancy Weighted Average Variable Cost per Room (Calculatrted in Q1) CM (Rev - VC per room) Breakeven Room nights Occupancy Rooms available Operating Days Total Room nights available Breakeven Occupancy rate 10 15 14 2.54 11.46 1345 30 240 7200 18.7% 15415

Variable Cost Contribution Margin BE Occupancy Rate

Extra profits that will be yielded

Predicted Occupancy rate is 20% - 40% Lowest Predicted Occupancy rate is 20% Calculated Breakeven Occupancy Room Difference 1440 1345 95

So 95 rooms extra are being occupied even at lowest prediction, yielding an extra profit of

1087

Question 4 1 2 3 4 5 6 7 Alternatives to consider Do Nothing Open - No adv - No Pool Open - Adv- No Pool Open - No Adv - Pool only Open - Adv - Pool only Open - No Adv - Pool & Bubble Open - Adv - Pool & Bubble

DECISION ALTERNATIVE

67.3%

63 rooms occupied per night

Rooms that ve to be occupied to cover the additional costs