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What is the contribution margin from this special offer

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Question - Grand Garden is a hotel with 280 suites. Its regular suite price is $220 per night per suite. The hotel's total cost per night is $150 per suite and consists of the following.

Variable cost $110

Fixed cost 40

Total cost per night per suite $150

The hotel manager receives an offer to hold the local Bikers' Club meeting at the hotel in March, which is the hotel's slow season with a low occupancy rate per night. The Bikers' Club would reserve 240 suites for one night if the hotel accepts a price of $118 per night.

Required -

(a) What is the contribution margin from this special offer?

(b) Should the Bikers' Club offer be accepted or rejected?

Reference no: EM133156083

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