Finance homework for today

1. Rooter's Cleaning Services provided data concerning the costs incurred to clean hotel rooms for which hotel customers pay $150 per night. Data for the past 7 months are as follows:

	January	February	March	April	May	June	July
Number of rooms cleaned	250	160	200	150	285	170	260
Cleaning cost	$6,450	$4,060	$5,100	$4,100	$7,000	$4,200	$6,530

How much are estimated monthly variable costs using the high-low method?

2. Winny's Office Furniture has a contribution margin ratio of 16%. If fixed costs are $183,800, how many dollars of revenue must the company generate in order to reach the break-even point?

Answer:

3. Tim Taylor has written a self improvement book that has the following cost characteristics:

Selling Price	$16.00 per book
Variable cost per unit:
Production	$4.00
Selling & administrative	2.00
Fixed costs:
Production	$92,800 per year
Selling & administrative	21,300 per year

How many units must be sold to break-even?

4. Hotels and airline companies often sell their rooms and seats at deep discounts on sites like www.priceline.com andwww.hotwire.com. The prices for these hotel rooms and airline seats are often way below what the company needs to make to cover its costs.

1. Discuss why airline and hotel companies are willing to do this? (Think about the different types of costs as they apply to hotels and airlines when you present your reasoning.)

2. Airlines as well as hotel companies have their own websites where customers can buy seats or rooms. Why do you think they prefer to use priceline or hotwire for the 'deeply discounted' product rather than their own website? (Note: This is not from the text and is really more of a marketing issue. But, it is always interesting to see the interrelatedness of the different branches of business - so use your marketing knowledge, personally savvy or imagination on this one!)