The 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.
1. Go back to the original data. If the hotel spends an additional $10,000 in the month of February on advertising they feel that they can expect occupancy rate to increase by 5%. What would be the financial impact of spending this additional 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.
2. 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.
3. If the hotel is able to increase occupancy to 90% by how much will total costs increase for the month of February (28 days)?
A) $7,168.
B) $8,960.
C) $17,360.
D) $15,568.