Question

Analyze Cityscape Hotels 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 The special weekend price is proposed for $120 per room night. At this price, it is anticipated that average occupancy for the weekend (Friday, Saturday, and Sunday) will increase from 30% to 50% of available rooms. a. What is the contribution margin for a room night under the normal pricing if only the hotel depreciation and hotel staff (excluding housekeeping) are assumed fixed for all occupancy levels

Answer 1

Answer:

$147

Explanation:

For the computation of contribution margin for a room night first we need to find out the variable cost per night which is shown below:-

Variable cost per room night = Housekeeping service + Utilities + Amenities

= $23 + $7 + $3

= $33 per room night

Contribution per room night under normal pricing = Normal price per room night - Variable cost per room night

= $180 - $33

= $147 per room night

Therefore for computing the contribution margin for a room night we simply applied the above formula.