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?

A) $86,560.

B) $173,600.

C) $71,680.

D) $155,680.

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?

a) $41,667

b) $43,750

c) $1,120

d) $50,000