Questions for Skyview Manor
1. On average, how many rooms must be rented each night in season for the hotel to breakeven? First Alternative:
Step 1:
Calculate Weighted Average Revenue per room = [Pr(Specific Room Type) x Rent for
Specific Room Type]
Pr(East) = 50 / 80
Pr(West) = 30 / 80
Pr(Single) = 2 / 10 (Keep in mind that 2:8 implies a ratio of 2/10)
Pr(Double) = 8 / 10
Room Type
Rev per
Room
Weighted
Average
Pr(East Single) = (50 / 80) x (2 / 10) = 12.5% $ 1 5 $ 1 .875
Pr(East Double) = (50 / 80) x (8 / 10) = 50.0% $ 2 0 $ 1 0.000
Pr(West Single) = (30 / 80) x (2 / 10) = 7.5% $ 2 0 $ 1 .500
Pr(West Double) = (30 / 80) x (8 / 10) = 30.0% $ 2 5 $ 7 .500
100.0% $ 2 0.875
$20.875 equals the Weighted Average Revenue per Night
Calc Probability
Step 2:
Room nights rented in FY ended 3/31/62 = Total Rev / Rev per room night = $160,800 / $ 20.875
(per room) = 7703 rooms
Step 3:
Calculate VC per room for FY
3/31/62
divided by
7703 rooms
Cleaning Supplies $ 1 ,920 $ 0.25
Linen Service $ 1 3,920 $ 1.81
1/2 Misc $ 3 ,657 $ 0.47
$ 2.53 per room
Step 4:
Calculate FC
Fixed Costs = Total Cost – Variable Costs
= 138,410 – (1,920 + 13,920 + 3,657)
= $118,913
Step 5:
Calculate BE
BE units = FC / CM
= $118,913 / ($20,875 – $2.53)
= 6482 rooms per season or 54 rooms per night
2. The hotel is full on weekends in the ski season. If all room rates were raised $5 on weekend nights, but occupancy fell to 72 rooms instead of 80, what is the revised profit before taxes for the year, per Exhibit 1?
Step 1:
Calculate the number of weekend nights
120 days per season x (2/7) = 34.3 weekend nights
Step 2:
Calculate the change in Rev
Rev = New Weekend Rev – Old Weekend Rev
= 34.3 days x 72 rooms x ($20.875 + $5) per room – 34.3 x 80 x 20.875
= $63,900.90 – $57,281
= $6,619.90
Step 3:
Calculate the change in Costs (Only Variable Costs will