Question

Your first job is in hotel management and recently you were promoted to Hotel Manager for a large convention hotel in downtown New Orleans. Answer the following questions given the information below for one day. What is the total contribution to profit and overhead?

Characteristic/Variable Business Hotel Customers (B) Convention Association Hotel Customers (C)
Customers for this day (D) 280 room nights rented (DB) 400 room nights rented (DC)
Average price/room night (VC) $100 (PB) $75 (PC)
Variable cost/room night (VC) $25 $25
Maximum price/room night (called the rack rate) $150 $110
Maximum number rooms available for sale this day 300 room nights available 700 room nights available

a. $39,500
b. $44,170
c. $38,750
d. $41,000
e. $34,567

Answer 1

d. $41,000

Step-by-step explanation:

The computation of the total contribution to profit and overhead is shown below:

Contribution by Business Hotel Customers is

= Sales - variable cost

= (100-25) ×280

= $21,000

Now

Contribution by Convention Association Hotel Customers = Sales - variable cost

= (75 - 25)× 400

= $20,000

And, finally

Total contribution to profit and overhead is

= $21,000 + $20,000

= $41,000