Question

Cityscape Hotels has 200 rooms available in a major metropolitan city. The hotel is able to attract business customers during the weekdays and leisure customers during the weekend. However, the leisure customers on weekends occupy fewer rooms than do business customers on weekdays. Thus, Cityscape plans to provide special weekend pricing to attract additional leisure customers. A hotel room is priced at $180 per room night. The cost of a hotel room night includes the following: Cost Per Room Night (at normal occupancy) Housekeeping service $ 23 Utilities 7 Amenities 3 Hotel depreciation 55 Hotel staff (excluding housekeeping) 42 Total $130

Answer 1

$147

Explanation:.

Calculation for the contribution margin

First step is to calculate the variable cost per using this formula

Variable cost per room = Housekeeping service + Utilities + Amenities

Let plug in the formula

Variable cost per room = $23 + $7 + $3

Variable cost per room = $33 per room night

Now let calculate the contribution margin for a room night using this formula

Contribution margin for a room night =Price of room per night - Variable cost per room

Let plug in the formula

Contribution margin for a room night = $180 - $33

Contribution margin for a room night= $147 per room night

Therefore the contribution margin for a room night under the normal pricing is $147 per room night