Munoz Company had the following account balances as of December ...

[Lisaclaire]

Munoz Company had the following account balances as of December 31. Cash 15,000 Equipment 7,000 Accounts Payable 4,200 R. Munoz, Capital 10,300 R. Munoz, Drawing 3,000 Income from Services 18,500 Rent Expense 6,000 Salaries Expense 2,000 What is the credit balance of the trial balance?
 a. 28,800
   b. 33,000
   c. 25,500
   d. 17,800

Question 2

Considerations other than cost in pricing decisions.
 
  Fun Stay Express operates a 100-room hotel near a busy amusement park. During June, a 30-day month, Fun Stay Express experienced a 65 occupancy rate from Monday evening through Thursday evening (weeknights). On Friday through Sunday evenings (weekend nights), however, occupancy increases to 90. (There were 18 weeknights and 12 weekend nights in June.) Fun Stay Express charges 85 per night for a suite. The company recently hired Gina Johnson to manage the hotel to increase the hotel's profitability. The following information relates to Fun Stay Express' costs:
 
  Fun Stay Express offers free breakfast to guests. In June, there were an average of two breakfasts served per room-night on weeknights and 4 breakfasts served per room-night on weekend nights.
 
  Required:
  1. Calculate the average cost per room-night for June. What was Fun Stay Express' operating income or loss for the month?
  2. Gina Johnson estimates that if Fun Stay Express decreases the nightly rates to 75, weeknight occupancy will increase to 75. She also estimates that if the hotel increases the nightly rate on weekend nights to 105, occupancy on those nights will remain at 90. Would this be a good move for Fun Stay Express? Show your calculations.
  3. Why would the guests tolerate a 30 price difference between weeknights and weekend nights?
  4. A discount travel clearinghouse has approached Fun Stay Express with a proposal to offer last-minute deals on empty rooms on both weeknights and weekend nights. Assuming that there will be an average of three breakfasts served per night per room, what is the minimum price that Fun Stay Express could accept on the last-minute rooms?

[kmb352]

Answer to Question 1

b

Answer to Question 2

1.
Guest nights on weeknights:
18 weeknights  100 rooms  65 = 1,170
Guest nights on weekend nights:
12 weekend nights  100 rooms  90 = 1,080
Total guest nights in June = 1,170 + 1,080 = 2,250
Breakfasts served:
1,170 weeknight guest nights  2 = 2,340
1,080 weekend guest nights  4 = 4,320
Total breakfasts served in June = 2,340 + 4,320 = 6,660
Total costs for June:
Depreciation  25,000
Administrative costs 38,000
Fixed housekeeping and supplies 16,000
Variable housekeeping and supplies (2,250  30) 67,500
Fixed breakfast costs 12,000
Variable breakfast costs (6,660  6) 39,960
Total costs for June 198,460
Cost per guest night (198,460  2,250) 88.20
Revenue for June (85  2,250) 191,250
Total costs for June 198,460
Operating income/(loss)  (7,210)
2.
New weeknight guest nights
18 weeknights  100 rooms  75 = 1,350
New weekend guest nights
12 weeknights  100 rooms  90 = 1,080
Total guest nights in June l = 1,350 + 1,080 = 2,430
Breakfasts served:
1,350 weeknight guest nights  2 = 2,700
1,080 weekend guest nights  4 = 4,320
Total breakfasts served in June = 2,700 + 4,320 = 7,020
Total costs for June:
Depreciation  25,000
Administrative costs 38,000
Fixed housekeeping and supplies 16,000
Variable housekeeping and supplies (2,430  30) 72,900
Fixed breakfast costs 12,000
Variable breakfast costs (7,020  6) 42,120
Total costs 206,020
Revenue (1,350  75) + (1,080  105) 214,650
Total costs for June 206,020
Operating income  8,630

Yes, this pricing arrangement would increase operating income by 15,840 from an operating loss of 7,210 to an operating income of 8,630 (8,630 + 7,210 = 15,840).

3. Guests typically do not come to the amusement park on weekdays because adults are busy at work and children have to attend school. The weeknight guests are families who stay at the hotel for convenience. They are willing to consider other hotel options or even not travel at all if the price is high and unaffordable. Reducing the weeknight price is important to entice families to try to come to the amusement park on weekdays. The demand of weeknight guests is elastic.
In contrast, weekends are really the only time when families can conveniently come to the amusement park given their busy weekday schedules. The demand of pleasure travelers on weekends is inelastic. Because of the differences in preferences of the weeknight and weekend guests, Fun Stay Express can price discriminate between these guests by charging 30 more on weekends than on weeknights and still have weekend travelers stay at the hotel.

4. Fun Stay Express would need to charge a minimum of 48 per night for the last-minute rooms, an amount equal to the variable cost per room. Variable cost per room night = 30 per room night + 6  3 breakfasts = 48. Any price above 48 would increase Executive Suites operating income.