? e Grand Gar A company has two i e Grand Garden Is A Li ? O https// No resultsO

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? e Grand Gar A company has two i e Grand Garden Is A Li ? O https// No resultsOptions v Help Save & Exit Subn Grand Garden is a luxury hotel with 150 suites. lts regular suite rate is $220 per night per suite. The hotel's cost per night is $145 per suite and consists of the following. Variable direct labor and materials cost Fixed cost [($5,97e,000/15e suites) 365 36 109 $145 2)days] Total cost per night per suite The hotel manager received an offer to hold the local Bikers' Club annual meeting at the hotel in March, which is the hotel's low season with an occupancy rate of under 55%. The Bikers' Club would reserve 45 suites for three nights if the hotel could offer a 55% discount, or a rate of $99 per night. The hotel manager is inclined to reject the offer because the cost per suite per night is $145 Required: Prepare an analysis of this offer for the hotel manager ere to search

Explanation / Answer

Contribution Margin Analysis (Amounts in $)

The offer should be accepted as there is an increase in the net income of $8,505.

Sales from the offer (45 suites*3 nights*$99) 13,365 Less: Variable costs (45 suites*3 nights*$36) (4,860) Contribution Margin 8,505 Less: Additional Fixed cost for the offer 0 Net Income 8,505

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