Suppose a Super 9 Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel.Average daily room rents are $60 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) $1,737,500
B) $4,475,000
C) $5,475,000
D) $5,570,000

Question

Quizplus · Accepted Answer

Net income is calculated by subtracting total costs from total revenue. Total revenue is calculated as the average daily room rent multiplied by the number of rooms rented per day, then multiplied by 365 days. With the hotel half full, 150 rooms are rented daily. Total revenue = $60 * 150 rooms * 365 days = $3,285,000. Total variable costs = $10 * 150 rooms * 365 days = $547,500. Total costs = Fixed costs + Variable costs = $1,000,000 + $547,500 = $1,547,500. Net income = Total revenue - Total costs = $3,285,000 - $1,547,500 = $1,737,500.

Suppose a Super 9 Hotel Has Annual Fixed Costs Applicable