A 125 room hotel has an annual fixed cost of $1,150,000 and a profit goal of 150,000. With an average room rate of $78 and average variable cost of $34 per room sold, determine the annual number of room sales, occupancy percentage, and revenue required.

A 125 room hotel has an annual fixed cost of $1,150,000 and a profit goal of 150,000. With an average room rate of $78 and average variable cost of $34 per room sold, determine the annual number of room sales, occupancy percentage, and revenue required.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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Definition Definition Measure of the cost of production per unit of output, including only variable costs such as wages, materials, and utilities. AVC is calculated by dividing total variable cost by the number of units produced. Understanding average variable cost is important for businesses to make decisions on pricing, production levels, and profitability.

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