A 90-room motel has an average room rate of $64 and average occupancy of 77%. Its fixed costs are $800,000 a year, and its variable costs total $500,000.The owner wants to increase operating income from current level to $250,000. She decides to do the following adjustments:increase price by $6spend $30,000 more per year on marketing to compensate for the higher room rateTo motivate the staff, the owner also set a $2,000 reward to the best employeeSend guest fruits to each room, which costs $5 per roomHow many rooms does she need to sell per night?

Room rent = 90 rooms *77% occupancy *$64 per room per night *312 days/nights = 90…

Answered: A 90-room motel has an average room…

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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A 90-room motel has an average room rate of $64 and average occupancy of 77%. Its fixed costs are $800,000 a year, and its variable costs total $500,000.

The owner wants to increase operating income from current level to $250,000. She decides to do the following adjustments:

increase price by $6
spend $30,000 more per year on marketing to compensate for the higher room rate
To motivate the staff, the owner also set a $2,000 reward to the best employee
Send guest fruits to each room, which costs $5 per room

How many rooms does she need to sell per night?

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