Grand Garden is a luxury hotel with 160 suites. Its regular suite rate is $210 per night per suite. The hotel's cost per night is $135 per suite and consists of the following. Variable direct labor and materials cost $33 Fixed cost ((55,978,800/160 suites) + 365 days) 102 Total cost per night per suite $135 The hotel manager receives an offer to hold the local Bikers' Club annual meeting at the hotel in March, which is the hotel's low season with an occupancy rate of under 60%. The Bikers' Club would reserve 40 suites for three nights if the hotel could offer a 60% discount or a rate of $84 per night. The hotel manager is inclined to reject the offer because the cost per suite per night is $135. Prepare an analysis of this offer for the hotel manager. Should the offer from the Bikers' Club be accepted or rejected? What is the contribution margin from accepting the offer?

Grand Garden is a luxury hotel with 160 suites. Its regular suite rate is $210 per night per suite. The hotel's cost per night is $135 per suite and consists of the following. Variable direct labor and materials cost $33 Fixed cost ((55,978,800/160 suites) + 365 days) 102 Total cost per night per suite $135 The hotel manager receives an offer to hold the local Bikers' Club annual meeting at the hotel in March, which is the hotel's low season with an occupancy rate of under 60%. The Bikers' Club would reserve 40 suites for three nights if the hotel could offer a 60% discount or a rate of $84 per night. The hotel manager is inclined to reject the offer because the cost per suite per night is $135. Prepare an analysis of this offer for the hotel manager. Should the offer from the Bikers' Club be accepted or rejected? What is the contribution margin from accepting the offer?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 7CE: Jean and Tom Perritz own and manage Happy Home Helpers. Inc. (HHH), a house-cleaning service. Each...

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