Skyview Manor Solution

Question 1 Identify Variable Cost Cleaning Supplies Linen Service 1/2 Misc Expenses Total Variable Cost

1920 13920 3657 19497

VC per Room Night Total Rooms Operating Days Total Room Nights (Capacity Available) Occupancy Rate Occupied Room Nights (Used Capacity)

80 120 9600 80% 7680

Per Occupied Room Night

2.54

Average Revenue Avg Rev - Per Unit Var Cost

20.94 18.40

Contribution Margin

Fixed Cost

Fixed Cost

Break Even Point Per Night (/120)

118913 6463 54

Question 2 When we lose room nights, we are only losing the CM from those room nights, not the revenue as such Lost CM due to Lost Room Nights

Rooms Lost on Weekend Days Weekend Days CM per Room Night Lost CM, due to room nights lost

8 34 18.40 5005

Added CM due to raised prices Rooms occupied Weekend Days Added Price (Increase in SP, implying increase in CM since CM = Avg Rev - SP) Added CM due to Price (SP) increase Profit Before Taxes

72 34 5 12240

Difference in CM after the Price Increase New Breakeven Point (The least number of rooms to be occupied) Breakeven Lost Rooms CM Per Room night

7235

X 18.4

X*18.40 = (80-X)*5 18.4X=400-5X 18.4X+5X = 400 23.4X = 400 X = 400/23.4 = 17 New Breakeven rooms New least occupancy for breakeven

17 63

The price increase holds good if there are atleast 63 rooms occupied per

Question 3 Additional Expense for just staying open in off season

15415

Revenue

Variable Cost

Single Occupancy Double Occupancy Weighted Average Variable Cost per Room (Calculatrted in Q1)

Contribution Margin

CM (Rev - VC per room)

11.46

BE Occupancy Rate

Breakeven Room nights Occupancy

1345

Rooms available Operating Days Total Room nights available

30 240 7200

Breakeven Occupancy rate

18.7%

Extra profits that will be yielded

10 15 14 2.54

Predicted Occupancy rate is 20% - 40% Lowest Predicted Occupancy rate is 20% Calculated Breakeven Occupancy Room Difference

1440 1345 95

So 95 rooms extra are being occupied even at lowest prediction, yielding an extra profit of

Question 4 1 2 3 4 5 6 7

Alternatives to consider Do Nothing Open - No adv - No Pool Open - Adv- No Pool Open - No Adv - Pool only Open - Adv - Pool only Open - No Adv - Pool & Bubble Open - Adv - Pool & Bubble

DECISION ALTERNATIVE

1087

67.3%

63 rooms occupied per night

Rooms that ve to be occupied to cover the additional costs