Grand Garden is a hotel with 120 suites. Its regular suite price is $240 per...
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Grand Garden is a hotel with 120 suites. Its regular suite price is $240 per night per suite. The hotels total cost per night is $170 per suite and consists of the following.
| Variable cost | $ 130 |
|---|---|
| Fixed cost | 40 |
| Total cost per night per suite | $ 170 |
The hotel manager receives an offer to hold the local Bikers Club meeting at the hotel in March, which is the hotels slow season with a low occupancy rate per night. The Bikers Club would reserve 90 suites for one night if the hotel accepts a price of $138 per night. (a) What is the contribution margin from this special offer? (b) Should the Bikers Club offer be accepted or rejected?
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