The principal question of the case study is whether Skyview Manor should stay open during the off-season or not. Currently, Skyview Manor is operating during the skiing season which opens a total of 120 hotel operating days but if they remain open the hotel will operate 365 days a year.
The manager of the hotel, Mr. Kacheck, is worried about off-season losses. Mr. Kacheck proposed following ideas in order to increase the occupancy and decrease the losses. * Stay open in the off-season and advertise * Stay open in the off-season, advertise, and add a heated/covered pool * Stay open in the off-season and add a heated/covered pool (no advertising) * Stay open in the off-season, advertise and add a seasonal pool
To begin
Variable expenses are calculated on a per unit basis due to weekday room rentals maintaining same occupancy rates of approximately 80% and weekend room rentals decreasing to approx 90%. Fixed expenses remain the same from question #1 ($118,913.00). A contribution margin income statement follows: Skyview Manor
Contribution Margin Income Statement

Revenue $167,344.32

Variable Expenses (Itemized) Cleaning Supplies 1,865.60 Linen Service 13,525.60 Misc Expenses 3,553.39 18,944.59 Contribution Margin $148,399.73

Fixed Expenses $118,913.00 Profit before Federal Income Taxes $29,486.73 Federal income tax (48%) 14,153.63 Net Profit $15,333.10

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* Cleaning Supplies = (1,920 / 120 = $16.00 x 86 = $1,376.00) + (1,920 / 120 = $16.00 x 34 x .90 = $489.60) = $1,865.60 Linen Service = (13,920 / 120 = $116.00 x 86=$9,976.00) + (13,920/120 = $116.00 x 34 x .90 = $3,549.60) = $13,525.60 Misc Expenses = (3,657 / 120 = $30.475 x 86 = $2,620.85) + (3,657 /