Q1) Sunrise Hotel has 200 rooms. Each room rents at $110 per night and variable costs total $16 per room per night of occupancy. Fixed costs total $84,000 per month.
i) If hotel spends extra $10,000 in the month of February on advertising they feel that they can expect occupancy rate to rise by 5%. What would be te financial impact of spending this extra money on advertising for month of February (28 days)?
A) Total fixed costs will increase by $10,500.
B) Net income will increase by $16,320.
C) Net income will increase by $26,320.
D) Total fixed costs will remain the same.
ii) If 80% of the rooms are occupied each night in the month of February (28 days) what will total costs be for the month?
Q2) Manufacturing overhead is assigned to products based on number of machine hours required. In year when 20,000 machine hours were anticipated, costs were budgeted at $125,000. If product needs 7,000 machine hours, how much manufacturing overhead will be assigned to this product?