ohn Beck is the managing partner of a business that
has just finished building a room motel. Beck anticipates that he will rent these rooms for nights
next year or roomnights All rooms are similar and will rent for the same price. Beck estimates the
following operating costs for next year:
$ per roomnight
Variable operating costs Fixed costs
Salaries and wages $
Maintenance of building and pool Other operating and administration costs Total fixed costs $
The capital invested in the motel is $ The partnerships target return on investment is Beck
expects demand for rooms to be uniform throughout the year. He plans to price the rooms at full cost plus
a markup on full cost to earn the target return on investment.
Required
of a roomnight?
What price should Beck charge for a roomnight? What is the markup as a percentage of the full cost
