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(a) What is the contribution margin from this special offer? (b) Should the Bikers’ Club offer be accepted or rejected?

(a) What is the contribution margin from this special offer? (b) Should the Bikers’ Club offer be accepted or rejected?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Grand Garden is a hotel with 140 suites. Its regular suite price is $210 per night per suite. The hotel’s total cost per night is $150 per suite and consists of the following.
   

Variable cost $ 110
Fixed cost 40
Total cost per night per suite $ 150


The hotel manager receives an offer to hold the local Bikers’ Club meeting at the hotel in March, which is the hotel’s slow season with a low occupancy rate per night. The Bikers’ Club would reserve 120 suites for one night if the hotel accepts a price of $118 per night.

(a) What is the contribution margin from this special offer?
(b) Should the Bikers’ Club offer be accepted or rejected?

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