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Question - Prairie Motels has a total of 2,800 rooms in its chain of motels located in eastern Canada. On average, 65% of the rooms are occupied each day. The company's operating costs are $15 per occupied room per day at this occupancy level, assuming a 30-day month. This $15 contains both variable and fixed cost elements. During April, the occupancy rate dropped to only 40%. A total of $598,500 in operating cost was incurred during April.
Required -
1. Estimate the variable cost per occupied room per day.
2. Estimate the total fixed operating costs per month.
3. Assume that the occupancy rate increases to 55% during May. What total operating costs would you expect the company to incur in May?
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