Problem 3. Budget Inn and Suites sets its ADR to be $115 and only has...
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Accounting
Problem 3. Budget Inn and Suites sets its ADR to be $115 and only has one room type. The variable costs per room are $25. All the fixed costs (rent, wages, and others) total $6,500 a month. In the previous month, Budget Inn sold 2,250 rooms. (Income tax rate is 20%). Please conduct analyses to answer the following questions. How much net income after tax did the business eam in the previous month? (2.5 pts) In the coming month, your target net income to be $185,000 after paying taxes. To achieve this goal, how many rooms you need to sell next month? (2.5 pts) In order to achieve this goal, you plan to promote your hotel at a local travel website. The promotion cost will be $3500 per month and you expect to see an increase in monthly revenue by 17.5%. Is this additional effort a good strategy for you to reach the goal ($185.000 net income after tax)? Provide evidence that supports your opinion. (2.5 pts) Following the last question if your goal is just to improve your business performance compared to the previous month. Should you pursuit this marketing investment in the local travel website? Provide explanation for your opinion by referencing to the correct numbers. (2.5 pts)
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