Suppose a Holiday Inn Hotel has annual fixed costs applicable to its rooms of $1.2 million for its 300-room hotel.Average daily room rents are $50 per room and average variable costs are $10 for each room rented.It operates 365 days per year.If the hotel is one-half full throughout the entire year,what is the amount of net income for one year?
A)$(1,192,500)
B)$990,000
C)$1,590,000
D)$2,737,500

Question

Quizplus · Accepted Answer

First, we need to find the total revenue generated by the hotel in one year:

Total rooms = 300
Rooms booked daily = 300/2 = 150
Average daily revenue per room = $50
Total revenue per day = 150 x $50 = $7,500
Total revenue per year = $7,500 x 365 = $2,737,500

Next, we need to find the total variable costs for the hotel:

Variable cost per room = $10
Variable cost per day = 150 x $10 = $1,500
Total variable cost per year = $1,500 x 365 = $547,500

Finally, we can calculate the net income for the hotel:

Net income = Total revenue - Total variable costs - Fixed costs
Net income = $2,737,500 - $547,500 - $1,200,000
Net income = $990,000

Therefore, the answer is (B) $990,000.

Suppose a Holiday Inn Hotel Has Annual Fixed Costs Applicable