Accounting for Managers: Interpreting accounting information for decision-making

390 ACCOUNTING FOR MANAGERS

is shown below:
Number of Price per room
rooms sold per night (£)
120 90
100 105
80 135
60 155
50 175

Giggo Hotels has estimated its variable costs at £25 per room per night. Calculate
the occupancy rate that Giggo will need in order to maximize its profits.

Questions for Chapter 9

9.1 The following data relate to activity and costs for two recent months:

November December

Activity level in units 5,000 10,000

££

Variable costs 10,000?

Fixed costs 30,000?

Semi-variable costs 20,000?

Total costs 60,000 75,000

Assuming that both activity levels are within the relevant range, calculate for
December the:

žvariable costs;
žfixed costs;
žsemi-variable costs.

9.2 Maxitank makes two products. Its costs are:

Product R Product S

Selling price 12 20

Direct materials 4 11

Direct labour hours 2 4

Machine hours 4 3

Maxitank’s sales are limited by the machine capacity of the factory. Which of the
two products should be produced first in order to maximize the profits generated
from the limited capacity?