Homework Answers
| ADR | 60 | ||||||
| Variable cost | 20 | ||||||
| Contribution margin | 40 | ||||||
| Requirements | |||||||
| 1 | CMR = | Contribution | / | ADR | |||
| 40 | / | 60 | = | 66.67% | |||
| 2 | Breakeven point | Fixed Cost | / | Contribution per room | |||
| 20000 | / | 40 | = | 500 | rooms | ||
| 3 | Target total revenue | (Target profit/(1-tax)+fixed cost) | / | Contribution margin | |||
| (10000/0.80)+10000 | / | 66.67% | |||||
| 22500 | / | 66.67% | = | $33,750 | |||
| 4 | Breakeven day | Target revenue | / | Contribution per day of motel | |||
| $10,000 | / | 2000 | = | 5 | day | ||
| 5 | New variable cost= | 30 | |||||
| CMR | 66.67% | ||||||
| New ADR | 90 | (30/(1-0.6667) | |||||
| Hence ADR to be increased by | 50% | ||||||
*If you have any doubt feel free to ask in the comment section.Please give your valuable feedback.
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