Cost Management (Cost of Service sector) Problem

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Guest

A hotel operated by a company has 180 single rooms and 60 double rooms. The rent of the double rooms is set at 160% of the rent of the single rooms. The operational costs per day per room are estimated as under:

Variable costs per day for a single room and a double room are Rs.300 and Rs.500 respectively.

Fixed costs per day for a single room and a double room are Rs.500 and Rs.780 respectively.

The average occupancy of both the single rooms and double rooms is expected to be 85% throughout a year of 365 days. In fixing the room rent, the company desires to earn a margin of safety of 20% on its tariff. The company has to pay 20% tax on its tariff.

Required:

(i) Calculate the tariff per day per (1) Single room and (2) Double room.

(ii) The hotel intends to reserve the normal occupancy of 12 single rooms for one of its valued corporate customers at a discount (excluding tax) of 10% of the rent what increase in the occupancy of the remaining single room days is required to compensate the loss arising from the discount.

Replies (5)

Pooja Chopda

Practising Chartered Accountant

931 Points Joined April 2008

pls provide ur email so that I can mail the solution.

Guest

my mail id is lavanya008 @ gmail.com

Pooja Chopda

Practising Chartered Accountant

931 Points Joined April 2008

Hi,

I have emailed the solution. Also u can find it in share files at /share_files/files_display.asp?files_id=6162

ankit

student

307 Points Joined July 2011

Elegant hotel has a capacity of 100 single rooms and 20 double rooms. It has a sports centre with a swimming pool, which is also used by persons other than residents of the hotel. The hotel also has a shopping arcade at the basement and a specialty restaurant at the roof top.

The following information is available:

Average occupancy: 75% for 365 days of the year.

Current costs in Rs. Per day are:

Particulars	Single room(Rs.)	Double room(Rs.)
Variable costs	400	500
Fixed costs	200	250

Average sales per day of restaurant Rs 1, 00,000.Contribution is at 30%.Fixed cost is Rs 10,00,000.

The sports centre/swimming pool is likely to be used by 50 non-residents daily, average contribution per day per non-resident is estimated at rs 50.Fixed cost is Rs 5,00,000 per annum.

Average contribution per month from shopping arcade is rs 50,000.Annual fixed cost is Rs 6,00,000.

You are required to find out:

Rent chargeable for single and double room per day,so that there is a margin of safety of 20% on hire of rooms and that the rent for a double room should be kept at 120% of a single room.