A hotel has an average daily rate ADR of 150 fixed costs for

A hotel has an average daily rate (ADR) of $150, fixed costs for each of 2,200 rooms sold during the month of $15, and a variable cost percentage of 10%. Its contribution margin ($) per room is: a. $115. b. $135. c. $140. d. $150.

Solution

total revenue = 150*2200 = $330000

total fixed cost = 15*2200 = $33000

total variable cost = total sales*variable cost percentage = 330000*0.1 = $33000

contribution margin per room = ($330000 - $33000)/2200 = $135