Crescendo Concept

Topics: Costs, Cost, Price Pages: 2 (282 words) Published: April 9, 2011
Shannon Crocker
March 11, 2011
HTT 230
Israel Johnson
Crescendo Checkpoint

2. Utilize the cost-volume-profit analysis to determine how many rooms you would need to sell to reach the budgeted revenue goal of $150 per room. Fixed costs for the hotel are $470,000 per room, and the labor cost to maintain each room is $40 (Analysis of Financial Statements, 2011). Formula:breakdown volume = fixed cost / sales price - variable cost BV= $470,000 / $150-$40

BV= $470,000 / 110
BV= 4272.7 or 4273
Occupancy % is room’s sold/rooms available
Occ%= 4273 / 31 x 125
Occ%= 4273 / 3875
Occ%= 1.10%
3. Now pretend you are Ms Samuelson and the owner requests that you increase net operating profit to $300,000. Is this attainable if the Crescendo Hotel only has 125 rooms? Use desired volume calculation (Analysis of Financial Statements, 2011). Formuladesired volume = fixed costs + desired profit / sale price – variable cost DV= $470,000 + $300,000 / 150 – 40

DV= $770,000 / 110
DV= 7,000
On average there are 30 days in a month at $125 that is 3,750. At this rate he would not achieve a 300,000 profit. This rate would not even cover the $470,000 the owner needs to make. To meet his goal he would need to charge the following amount. $770,000 / $125 room = $6160 / 30 days = $205.33 per night. You would then add the $40 it takes to maintain each room and this to the last total. The owner would need to charge $245.33 per night to reach his goal of $770,000.

Reference
Analysis Of Financial Statements. 2011. Retrieved from the University of Phoenix eBook Collection.
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