joshuasafwattaylor
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- Mar 19, 2021
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Hi you guys I have a Business math-related question that I got wrong for class I got a 01/200 points so I assume I was nowhere near the correct answer. Please help me with the solution. I will post the question and the solution that I had that was incorrect. Thank you so much!!
Question:
Use the information covered this week to complete this assignment.
Leaders of a small Disney World Hotel Resort are trying to assess when their hotel will become profitable. They want to make sure that they have priced their rooms properly. Provided is the cost analysis for the resort:
My solution that my professor marked incorrect:
5.2 Determining Profitability.
Fixed costs: $2000/(185-60)
We have our fixed cost of two thousand dollars and we need to divide by our contribution margin of 185-60 =$125.
When we complete the calculation, we find that we need to do a total of $6250.
$6250 in sales is 34 rooms sold. $6250 in sales ate $185 is 34 rooms sold.
This is our breakeven point. So to have a positive cash flow we need to sale at least 35 rooms
If a hotel has 10 rooms sold then it is operating in the red. I would suggest that management try to lower the cost of is fixed costs. Get a cheaper phone and internet plan, Make sure that rooms that are not occupied do not waste electricity. They may also need to focus on some sales tactics such as group sales.
Question:
Use the information covered this week to complete this assignment.
Leaders of a small Disney World Hotel Resort are trying to assess when their hotel will become profitable. They want to make sure that they have priced their rooms properly. Provided is the cost analysis for the resort:
- Total fixed cost per month for the hotel is (electricity, phone bill, room service) $2,000.
- Total variable cost for each room (guest supplies, breakfast F&B, etc.) is $ 60.
- Room’s sales rate is $185.
- How many rooms (round-up to the nearest room) need to be occupied to make the hotel start to generate a positive cash flow (i.e., profitable)?
- If the hotel has 10 occupied rooms for the month of July, would it be profitable? If not, what should you recommend to the leaders?
My solution that my professor marked incorrect:
5.2 Determining Profitability.
Fixed costs: $2000/(185-60)
We have our fixed cost of two thousand dollars and we need to divide by our contribution margin of 185-60 =$125.
When we complete the calculation, we find that we need to do a total of $6250.
$6250 in sales is 34 rooms sold. $6250 in sales ate $185 is 34 rooms sold.
This is our breakeven point. So to have a positive cash flow we need to sale at least 35 rooms
If a hotel has 10 rooms sold then it is operating in the red. I would suggest that management try to lower the cost of is fixed costs. Get a cheaper phone and internet plan, Make sure that rooms that are not occupied do not waste electricity. They may also need to focus on some sales tactics such as group sales.