In-class task #2
1. Chapter 4 – Questions
In the hotel industry, three important metrics that hotel managers consider to improve their hotel performance are Occupancy Rate, Average Daily Rate (ADR), and Revenue per Available Room (REVPAR), with the last metric being the most important one among all. Occupancy rate is the ratio of rooms sold in a given day divided by the total number of rooms available. ADR is the average of the selling price of all the rooms sold for one day. REVPAR is calculated by multiplying the ADR by the occupancy rate.
a) You are the hotel manager for a busy downtown hotel that has 120 rooms available to sell.
b) What is the occupancy rate if you sell 84 rooms on a specific day?
c) If the average daily rate is $180, calculate the REVPAR. Write an equation in the form of y=mx+b for this problem so that you can use it to calculate the hotel’s total revenue. Hint: Let x be the occupancy rate.
d) If you target a minimum revenue of $15,000 in a given day, how many rooms do you have to sell, assuming the ADR equals $180?
2. Chapter 5 – Questions
a) SportZ sponsors an evening session of skating at the local arena. A family pass is offered, whereby a parent and up to two children are admitted for $12. Free hot chocolate is provided to those with the family pass. The rental of the arena for each of these sessions costs $1,000. Hot chocolate costs $0.50 per person. Estimated capacity for the skating rink is 500 people.
i. If only family passes are sold, and each includes a parent and two children, how many family passes must be sold to break even?
ii. At break-even, what would be the total revenue?
iii. At break-even, what percent of capacity would result?
b) Along with the development of the new helmet for ice hockey, SportZ is also making changes to the street hockey helmets it offers. For one of the most popular models, the cost of the moulds is $49,920 and the selling price would be $39.99. On the basis of sales forecasts, the company estimates that it needs to sell 1,600 units to break even.
i. What is the maximum variable cost that can be spent to make each helmet, and still break even?
ii. If the variable cost per unit changes, and the contribution rate is 85%, how many units need to be sold to break even?
3. Chapter 6 – Questions
a) SportZ Ltd. has offered a series of discounts to their retail outlets. The basic wholesale discount is 30% off the suggested retail price. If the retailer purchases more than $5,000 from SportZ, a further 20% discount is applied. As an introductory offer on the new mask, if two masks are ordered, a further 5% discount is given for the total order. Lethbridge Sports has placed an order for $9,800, at the suggested retail price. How much will Lethbridge Sports have to pay for the order?
b) SportZ has received an invoice from one of its suppliers, dated April 2, for $30,120, terms 2/10. All or part of the amount owing will be paid on April 10.
i. How much would have to be paid to fully pay the invoice?
ii. How much would have to be paid to reduce the debt by $20,000?
c) A specific type of leather is needed to make gloves for a hockey player. The leather for each glove costs $12.00. To cut and style the leather, expenses of 45% of cost are incurred. The company targets a profit of 60% of cost.
i. What is the targeted selling price for the leather glove?
ii. What is the resulting markup based on cost?
iii. If the profit was reduced to 50% of cost, how much would be the sale price?
