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What is the contribution margin from this special offer

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Reference no: EM133146968

Question - Analyzing a special offer for a service company - Grand Garden is a hotel with 150 suites. Its regular suite price is $250 per night per suite. The hotel's total cost per night is $140 per suite and consists of the following.

Variable cost $110

Fixed cost 30

Total cost per night per suite $140

The hotel manager receives an offer to hold the local Bikers' Club meeting at the hotel in March, which is the hotel's slow season with a low occupancy rate per night. The Bikers' Club would reserve 150 suites for one night if the hotel accepts a price of $125 per night.

Required -

(a) What is the contribution margin from this special offer?

(b) Should the Bikers' Club offer be accepted or rejected?

Reference no: EM133146968

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