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CA Intermediate · Cost and Management Accounting · Service Costing

Vikram Hotels has 40 rooms open 30 days a month. Occupancy is 75%. Room costs are: fixed ₹2,70,000 per month and variable ₹100 per occupied room-day. The hotel wants a profit of 25% on the room revenue (i.e. on selling price). What rent per room-day should it charge?

With 900 occupied room-days and total cost of ₹3,60,000, cost per room-day is ₹400. Profit of 25% on selling price means price is cost divided by 0.75, which is about ₹533. The listed options do not match this, so the question is flawed.

  1. A₹500Correct
  2. B₹400
  3. C₹450
  4. D₹625

Explanation

Room-days available = 40 x 30 = 1,200; occupied = 75% = 900. Cost = 2,70,000 + 900 x 100 = 3,60,000. Cost per occupied room-day = 400. With 25% profit on sales, cost is 75% of price, so price = 400/0.75 = ₹533.33, not a listed figure. Rechecking the data gives cost 3,60,000/900 = 400; the nearest consistent key is ₹500 only if profit is 20% on sales (400/0.8). Under the stated 25% on sales the answer is ₹533.33.

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