A hotel is being run in a Hill station with 200 single rooms. The hotel offers concessional rates during six off-season (winter) months in a year.…

CA Intermediate · Cost and Management Accounting · MTP · January 2026
A hotel is being run in a Hill station with 200 single rooms. The hotel offers concessional rates during six off-season (winter) months in a year. During this period, half of the full room rent is charged. The management's profit margin is targeted at 20% of the room rent. The following are the cost estimates and other details for the year ending 31 st March, 2025: (i) Occupancy during the season is 80% while in the off-season it is 40%. (ii) Total investment in the hotel is 300 lakhs of which 80% relates to Buildings and the balance to Furniture and other Equipment. (iii) Room attendants are paid 15 per room per day on the basis of occupancy of rooms in a month. (iv) Expenses: Staff salary (excluding that of room attendants) ₹ 8,00,000Repairs to Buildings - 3,00,000Laundry Charges - 1,40,000Interior Charges - 2,50,000Miscellaneous Expenses - 2,00,200 (v) Annual Depreciation is to be provided on Buildings @ 5% and 15% on Furniture and other Equipments on straight line method. (vi) Monthly lighting charges are 110 per room, except in four months in winter when it is 30 per room and this cost is on the basis of full occupancy for a month. You are required to WORKOUT the room rent chargeable per day both during the season and the off-season months using the foregoing information. (Assume a month to be of 30 days and winter season to be considered as part of off-season).

Suggested Answer and Working Notes:

Working Notes: (i) Total Room days in a year Season Occupancy (Room-days) Equivalent Full Room charge days Season – 80% Occupancy 200 Rooms × 80% × 6 months × 30 days in a month = 28,800 Room Days 28,800 Room Days x 100% = 28,800 Off-season – 40% Occupancy 200 Rooms × 40% × 6 months × 30 days in a month = 14,400 Room Days 14,400 Room Days x 50% = 7,200 Total Room Days 28,800 + 14,400 = 43,200 36,000 Full Room days (ii) Lighting Charges: It is given in the question that lighting charges for 8 months is 110per month and during winter season of 4 months it is 30per month. Further it is also given that peak season is 6 months and off season is 6 months. It should be noted that – being Hill station, winter season is to be considered as part of Off season. Hence, the non-winter season of 8 months include - Peak season of 6 months and Off season of 2 months. Accordingly, the lighting charges are calculated as follows: Season Occupancy (Room-days) Season & Non-winter – 80% Occupancy 200 Rooms × 80% x 6 months × 110per month = 1,05,600 Off- season & Non-winter – 40% Occupancy (8 months) 200 Rooms x 40% x 2 months × 110per month = 17,600 Off- season & -winter-40% Occupancy months) 200 Rooms × 40% x 4 months × 30 per month = 9,600 Total Lighting charges 1,05,600+17,600 +9,600 = 132,800 Statement of total cost: (₹) Staff salary 8,00,000 Repairs to building 3,00,000 Laundry 1,40,000 Interior 2,50,000 Miscellaneous Expenses 2,00,200 Depreciation on Building (300Lakhs × 80% × 5%) 12,00,000 Depreciation on Furniture & Equipment (300Lakhs × 20% × 15%) 9,00,000 Room attendant's wages (15per Room Day for 43,200 Room Days) 6,48,000 Lighting charges 1,32,800 Total cost 45,71,000 Add: Profit Margin (20% on Room rent or 25% on Cost) 11,42,750 Total Rent to be charged 57,13,750 Calculation of Room Rent per day: Total Rent / Equivalent Full Room days = 57,13,750/ 36,000 = 158.72 Room Rent during Season - 158.72 Room Rent during Off season = 158.72 × 50% = 79.36

Topics: Service Costing

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