8 Suppose a Holiday Inn Hotel has annual fixed costs applica

8) Suppose a Holiday Inn Hotel has annual fixed costs applicable to its rooms of $1.2 million for its) 300-room hotel. Average daily room rents are $50 per room and average variable costs are $10 for each room rented. It operates 365 days per year. If the hotel is one-half full throughout the entire year, what is the amount of net income for one year? A) $1,590,000 B) $2,737,500 C) $(1,192,500) D) $990,000

Solution

Solution:-

D) $990,000

Explanation:-

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Particulars	Amount
Total rent [300 room * 365 days * ($50 * 0.50)]	2,737,500
Total variable cost [300 room * 365 days * ($10 * 0.50)]	547,500
Total fixed cost	1,200,000
Net income for the year	990,000