Answered: Chuck Stout is the RM for the Holiday…

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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Chuck Stout is the RM for the Holiday Inn Express. His 220-room property normally sells 85 percent of its rooms on Tuesday nights at an ADR of $141.50. All variable costs related to selling his rooms are $55.00 per room. The DOSM at his Holiday Inn Express is proposing to place a bid to sell 125 rooms for a Tuesday night next month at a rate of $109.00 per room. Chuck believes that if the hotel wins this group rooms bid, the transient room sales for that day will ensure a sell-out at the rate of $141.50.

p.s. Net Revenue = Total Revenue - Total Variable Cost

Expert Solution

Step 1

If contract is awarded
	No of rooms	Room Price	Room Variable cost	Contribution per room: Room Price less Room cost	Total Income: Contribution * No of rooms
Group Award	125.00	109.00	55.00	54.00	6,750.00
Individual	95.00	141.50	55.00	86.50	8,217.50
Total	220.00			Total	14,967.50

So option A is correct



If contract is not awarded
	No of rooms	Room Price	Room Variable cost	Contribution per room: Room Price less Room cost	Total Income: Contribution * No of rooms
Group Award	-	109.00	55.00	54.00	-
Individual	187.00	141.50	55.00	86.50	16,175.50
Total	187.00			Total	16,175.50

So option A is correct

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