Triatt Resort has 200 rooms. Each room rents at $130 per night and variable costs total $42 per room per night of occupancy. The fixed costs total $18,700 per month. If Triatt spends an additional $30,000 in June on advertising, it estimates it can expect an occupancy rate of 85%. What would be the financial impact of spending this additional money on advertising over an occupancy level of 70% during June?

Question

Quizplus · Accepted Answer

Net income will increase by $49,200 because the additional advertising will increase occupancy by 15%, which will generate an additional $49,200 in revenue. The variable costs will increase by $6,300, but the fixed costs will remain the same. Therefore, the net income will increase by $42,900.

Triatt Resort Has 200 Rooms