Question 1) The Moonstar Hotel has 200 rooms. Each room rents at $110 per night and variable costs total $16 per room per night of occupancy. Fixed costs total $84,000 per month.
If a Moonstar hotel spends the extra $10,000 in the month of February on advertising they feel that they can wait for occupancy rate to increase by 5%. What would be the financial impact of spending this extra money on advertising for the month of February (28 days)?
A) Total fixed costs will increase by $10,500.
B) Net income will increase by $16,320.
C) Net income will increase by $26,320.
D) Total fixed costs will remain the same.