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Hotel Majestic is interested in estimating fixed and variable costs so that the company can make
more accurate projections of costs and profit.The hotel is in a resort area that is particularly busy
from November through February. In July and August, however, the hotel has only a 50 percent
occupancy rate.
Required Classify each of the following costs as fixed (F), variable (V), or mixed (M) with
respect to the number of hotel guests per month: a. Depreciation of the building b. Salaries of
restaurant staff c. Salaries of administrative staff (hotel manager, desk clerks, accountants, etc.)
d. Soap, shampoo, and other toiletries in rooms ' e. Laundry costs (cost of linens, cleaning
products, depreciation of laundry equipment, etc.) f. Food and beverage costs g. Grounds
maintenance
Solution
a. Depreciation of the building - F - because it doesn't change with number of hotel guests
b. Salaries of restaurant staff -M - because some portion of salaries is fixed while some portion
of it is variable
c. Salaries of administrative staff (hotel manager, desk clerks, accountants, etc.) - F - because it
doesn't change with change in number of hotel guests.
d. Soap, shampoo, and other toiletries in rooms ' - V - because it changes with change in number
of hotel guests
e. Laundry costs (cost of linens, cleaning products, depreciation of laundry equipment, etc.) -M-
some of its expenses are fixed in nature such as depreciation while some of its expenses are
variable in nature
f. Food and beverage costs - V - because it changes with change in number of hotel guests
g. Grounds maintenance - F - because it doesn't change with change in number of hotel guests.

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Hotel Majestic is interested in estimating fixed and variable costs .pdf

  • 1. Hotel Majestic is interested in estimating fixed and variable costs so that the company can make more accurate projections of costs and profit.The hotel is in a resort area that is particularly busy from November through February. In July and August, however, the hotel has only a 50 percent occupancy rate. Required Classify each of the following costs as fixed (F), variable (V), or mixed (M) with respect to the number of hotel guests per month: a. Depreciation of the building b. Salaries of restaurant staff c. Salaries of administrative staff (hotel manager, desk clerks, accountants, etc.) d. Soap, shampoo, and other toiletries in rooms ' e. Laundry costs (cost of linens, cleaning products, depreciation of laundry equipment, etc.) f. Food and beverage costs g. Grounds maintenance Solution a. Depreciation of the building - F - because it doesn't change with number of hotel guests b. Salaries of restaurant staff -M - because some portion of salaries is fixed while some portion of it is variable c. Salaries of administrative staff (hotel manager, desk clerks, accountants, etc.) - F - because it doesn't change with change in number of hotel guests. d. Soap, shampoo, and other toiletries in rooms ' - V - because it changes with change in number of hotel guests e. Laundry costs (cost of linens, cleaning products, depreciation of laundry equipment, etc.) -M- some of its expenses are fixed in nature such as depreciation while some of its expenses are variable in nature f. Food and beverage costs - V - because it changes with change in number of hotel guests g. Grounds maintenance - F - because it doesn't change with change in number of hotel guests.