2. Chuck Stout is the RM for the Holiday Inn Express. His 220-room property normally sells 85 percent of its rooms on Tuesday nights at an ADR of $141.50. All variable costs related to selling his rooms are $55.00 per room. The DOSM at his Holiday Inn Express is proposing to place a bid to sell 125 rooms for a Tuesday night next month at a rate of $109.00 per room. Chuck believes that if the hotel wins this group rooms bid, the transient room sales for that day will ensure a sell-out at the rate of $141.50.

 

A. What would be the total amount of revenue the hotel will achieve if: It makes the group sale? _________________ It does not make the group sale? _________________

B. What would be the total amount of after-variable costs rooms’ revenue the hotel will achieve if it wins the group rooms contract? _________________

 

C. What would be the after-variable room’s income if the hotel does not win the contract? _________________

 

D. What additional factors might Chuck and the DOSM take into account before determining whether to bid on this piece of group rooms business?

 

3. The Brookshire Country Club rents its ballroom for weddings and provides food and beverages services for those using its facility. Last year, the Club hosted 25 wedding events. The total revenue derived from these events was $225,000. The product (food and beverage) costs associated with each wedding averaged 31.5 percent. All other variable costs for each event averaged 48.5 percent. What was the average after-costs revenue (in dollars and percent) achieved by the Club for each wedding event?

 

4. Gene Monte is president of the five-unit El Ray Taqueria chain of restaurants. His quickservice operations offer both dine-in and carry-out (drive through) service. Gene is considering keeping his operations open one additional hour per night. Based on his revenue estimates, the following data represent the incremental sales he believes he will achieve in each of his restaurants:

Assume Gene’s product cost is 30 percent and all other variable costs equal 45 percent of sales. Unit Number Additional Revenue 1 $850 2 $700 3 $650 4 $750 5 $900

 

A. What is the additional amount, per unit, that Gene could contribute to his fixed costs by extending his operating schedule by the additional hour?

B. What is the total amount of contribution to fixed costs he would achieve?

C. What additional factors should Gene take into account before implementing the extended schedule?

 

5. John Flowers owns Keneally’s Irish Pub. On the upcoming St. Patrick’s Day, John expects a capacity crowd. John normally operates with four servers. Because of seating limitations, John can only add a total of four more servers to his staff for St. Patrick’s Day. Each server costs John $12.00 per hour. His beverage costs are 25 percent. Each added server can generate an additional $600.00 in beverage sales per hour if they work a full 8-hour shift. Prepare a spreadsheet that details the increased revenue, labor costs, beverage costs, as well as the revenue remaining after John pays his product and labor costs if he places an additional one, two, three, or four full-time servers on his St Patrick’s Day employee schedule. What additional factors might John take into account before determining how many additional servers he should add?

 

Answer: