Q1) Sunrise 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.
i) If hotel spends extra $10,000 in the month of February on advertising they feel that they can expect occupancy rate to rise by 5%. What would be te financial impact of spending this extra money on advertising for 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.
ii) If 80% of the rooms are occupied each night in the month of February (28 days) what will total costs be for the month?
A) $86,560.
B) $173,600.
C) $71,680.
D) $155,680.
Q2) Manufacturing overhead is assigned to products based on number of machine hours required. In year when 20,000 machine hours were anticipated, costs were budgeted at $125,000. If product needs 7,000 machine hours, how much manufacturing overhead will be assigned to this product?
a) $41,667
b) $43,750
c) $1,120
d) $50,000