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Question - Grand Hotel and Suites is a hotel with 300 suites. Its regular suite price is $500 per night per suite. The hotel's total cost per night is $280 per suite and consists of the following.
Variable cost $220
Fixed cost 60
Total cost per night per suite $280
The hotel manager receives an offer to hold the local Cycling Club meeting at the hotel in March, which is the hotel's slow season with a low occupancy rate per night. The Cycling Club would reserve 300 suites for one night if the hotel accepts a price of $250 per night.
Required -
(a) What is the contribution margin from this special offer?
(b) Should the Cycling Club offer be accepted or rejected?
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