Question

Hotel Decent has a fixed cost of $100,000 and a variable cost of $10/night. Assuming that...

Hotel Decent has a fixed cost of $100,000 and a variable cost of $10/night. Assuming that the room rent for the hotel was $35/night:

What is the Contribution per Unit?

What is the Break Even Point?

Assuming that the hotel rents out 6,000 rooms per night at $35/night, then using the same fixed cost and variable cost as the previous two questions:

How much would the Total Revenue be?

How much would the total variable cost be?

How much profit does the hotel make?

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Homework Answers

Answer #1

1) Contribution Margin per Units = Selling Price-Variable cost Per Unit

= 35-10 = $ 25 Per Unit

2) Break Even Point

=in Units = Fixed cost / CM per Unit = 100,000/25 = 4000 Units

Dollars = Units *Selling Price = 4,000*35 = 140,000

If 6000 Rooms are Rented

1) Total Revenue = Rooms * Rent per Night = 6,000*35 = 210,000

2) Total Variable cost = Rooms * Variable cost Per room = 6,000*10 = 60,000

3) profit = Revenue -Variable cost - Fixed Cost = 210,000-60,000-100,000 = 50,000

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