Jason Barrett is the managing partner of a business that has just finished building a 60-room motel. Barrett anticipates

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Jason Barrett Is The Managing Partner Of A Business That Has Just Finished Building A 60 Room Motel Barrett Anticipates 1 (90.16 KiB) Viewed 28 times

Jason Barrett is the managing partner of a business that has just finished building a 60-room motel. Barrett anticipates that he will rent these rooms for 12,000 nights next year (or 12,000 room-nights). All rooms are similar and will rent for the same price. Barrett estimates the following operating costs for next year: (Click the icon to view the operating costs.) i (Click the icon to view additional information.) Read the requirements. Requirement 1. What price should Barrett charge for a room-night? What is the markup as a percentage of the full cost of a room-night? Begin by selecting the formula, then enter the amounts and solve for the room price per night. + = Price per room-night + = per room-night
$ 3 per Variable operating costs room-night Fixed costs 171,000 Salaries and wages Maintenance of building and pool 33,000 240,000 Other operating and administration costs $ 444,000 Total fixed costs Print Done
The capital invested in the motel is $1,040,000. The partnership's target return on investment is 30%. Barrett expects demand for rooms to be uniform throughout the year. He plans to price the rooms at full cost plus a markup on full cost to earn the target return on investment. Print Done
Requirements 1. What price should Barrett charge for a room-night? What is the markup as a percentage of the full cost of a room-night? 2. Barrett's market research indicates that if the price of a room-night determined in requirement 1 is reduced by 5%, the expected number of room-nights Barrett could rent would increase by 5%. Should Barrett reduce prices by 5%? Show your calculations.
Requirement 2. Barrett's market research indicates that if the price of a room-night determined in Requirement 1 is reduced by 5%, the expected number of room-nights Barrett could rent would increase by 5%. Should Barrett reduce prices by 5%? Show your calculations. Begin by calculating the new contribution margin which will help you make your decision. Select the formula first, then enter the amounts to calculate the contribution margin. (Round the new price per room to two decimal places. Round the contribution margin to the nearest dollar.) ( New price per room Variable cost per room )* New number of rooms rented = New contribution margin ) *