The Hotel Majestic is interested in estimating fixed and variable costs so that

Question

The Hotel Majestic is interested in estimating fixed and variable costs so that the company can make more accurate projections of costs and profit. The hotel is in a resort area that is particularly busy from November through February. In July and August, however, the hotel has only a 50 percent occupancy rate.

Classify each of the following costs as fixed, variable, or mixed with respect to the number of hotel guests per month:

a. Depreciation of the building

Fixed costMixed costVariable cost

b. Salaries of restaurant staff

Mixed costVariable costFixed cost

c. Salaries of administrative staff (hotel manager, desk clerks, accountants, etc.)

Variable costFixed costMixed cost

d. Soap, shampoo, and other toiletries in rooms

Mixed costFixed costVariable cost

e. Laundry costs (cost of linens, cleaning products, depreciation of laundry equipment, etc.)

Fixed costVariable costMixed cost

f. Food and beverage costs

Fixed costVariable costMixed cost

g. Grounds maintenance

Fixed costVariable costMixed cost

Explanation / Answer

Sr. No. Particulars Question Answer Remarks a. Depreciation of the building Fixed costMixed costVariable cost Fixed Cost Depreciation is charged on assets which are charged periodically in expenses , so this is a nature of fixed expenses b. Salaries of restaurant staff Mixed costVariable costFixed cost Mixed Cost This will be increse and decrese on the basis of requirement but there is some minimum requirement is there so this is in nature of Mixed cost c. Salaries of administrative staff (hotel manager, desk clerks, accountants, etc.) Variable costFixed costMixed cost Fixed Cost These expenses are oin nature of fixed exepsenses d. Soap, shampoo, and other toiletries in rooms Mixed costFixed costVariable cost Variable Cost This is a variable cost because it is depend on the customer visited in hotel e. Laundry costs (cost of linens, cleaning products, depreciation of laundry equipment, etc.) Fixed costVariable costMixed cost Variable Cost This is a variable cost because it is depend on the customer visited in hotel f. Food and beverage costs Fixed costVariable costMixed cost Variable Cost This is a variable cost because it is depend on the customer visited in hotel g. Grounds maintenance Fixed costVariable costMixed cost Fixed Cost This is a Fixed cost in nature

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