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23 November, 19:12

Suppose a hotel has annual fixed costs applicable to its rooms of $2,000,000 for its 300-room hotel. Average daily room rents are $50 per room and average variable costs are $10 for each room rented. It operates 365 days per year. If the hotel is completely full throughout the year, what is the operating income for one year

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  1. 23 November, 21:12
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    In order to calculate the operating income for one year we would have to make the following calculation:

    operating income=revenue-variable costs-fixed costs

    revenue=300*$50*365=$5,475,000

    variable costs=300*$10*365=$1,095,000

    fixed costs=$2,000,000

    Therefore, operating income=$5,475,000-$1,095,000-$2,000,000

    operating income=$2,380,000

    The operating income for one year is $2,380,000
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