Problem #1

Task 1 (30 minutes): Read the text and discuss what you need to learn in order to
answer the questions at the end of the text. Write a report with the elements you need to
learn.
Assume that a hotel has 200 rooms. Fixed costs are 2,000 per day. Each occupied
room increases costs by 10 per day.
The hotel owner believes that the next week (off-peak season) 100 rooms will be
occupied. The hotel owner employs a cost-plus pricing method, which consists of
selecting a price which covers average total cost and adds 20% margin above average
total cost to ensure a handsome profit.
a) With this data, how much should the hotel owner charge per room and day?
Compute the profits.
Unfortunately, given the price in a) the hotel only has 65 rooms booked.
b) What profit does the hotel obtain with the price computed in a) and 65 rooms
booked?
c) Given this result, should the owner change the price? How much should the
hotel owner charge per room and day to obtain 20% profit margin above average
total cost?
Unfortunately, given the price in c) the hotel only has 45 rooms booked.
d) What profit does the hotel obtain with the price computed in c) and 45 rooms
booked?
e) Given this result, should the owner change the price? How much should the
hotel owner charge per room and day to obtain 20% profit margin above average
total cost?
Unfortunately, given the price in e) the hotel only has 20 rooms booked.
f) What profit does the hotel obtain with the price computed in e) and 20 rooms
booked?
g) Given the previous results, should the hotel be shut down?

Task 2 (60 minutes): Answer questions a)-g).