Information on occupancy and costs at the New Light Hotel for April, May and Jun
ID: 2443907 • Letter: I
Question
Information on occupancy and costs at the New Light Hotel for April, May and June are indicated below:April May June
Occupancy 1,500 1,650 1,800
Day manager salary 4,200 4,200 4,200
Night manager salary 3,700 3,700 3,700
Cleaning staff 15,300 15,600 15,900
Depreciation 12,000 12,000 12,000
Complimentary continental breakfast:
Food & beverages 4,600 5,300 5,800
TOTAL 39,800 40,800 41,600
a.Calculate the fixed costs per month and the variable cost per occupied room using account analysis for April.
b.Calculate the fixed costs per month and the variable cost per occupied room using the high-low method.
c.Average room rates are $110 per night. What is the contribution margin per occupied room? In answering this question, use your variable cost estimate from Part b.
Explanation / Answer
a.Calculate the fixed costs per month and the variable cost per occupied room using account analysis for April.
Fixed cost per month (based on April data)
Day manager salary $4,200
Night manager salary $3,700
Depreciation $12,000
Total $19,900
Variable cost per month (based on April data)
Cleaning staff $15,300
Continental breakfast $4,600
Total Variable cost $19,900
Number of rooms(Occupancy) 1,500
Variable cost per room
= $19,900/1,500 $13.27
b.Calculate the fixed costs per month and the variable cost per occupied room using the high-low method.
Total costs for 1,800 rooms $41,600
Total costs for 1,500 rooms $39,800
Total 300 rooms $1,800
Variable cost per room
$1,800 / 300 $6.00 per occupied room
Fixed costs = $39,600 - (1,500 x $6) = $30,600
c.Average room rates are $110 per night. What is the contribution margin per occupied room? In answering this question, use your variable cost estimate from Part b.
$110 - $6 = $104 contribution margin per occupied room