A Hotel Manager Must Decide How Many Rooms to Overbook

question 68

Multiple Choice

A hotel manager must decide how many rooms to overbook.Room rates are $125 per night and each room costs $45 to maintain.A bumped customer is sent to another hotel at a cost of $75.Given the distribution of no-shows below,how many rooms should the manager overbook?

• A)Overbook 9 rooms
• B)Overbook 10 rooms
• C)Overbook 11 rooms
• D)Overbook 12 rooms

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Definitions:

Allowance for Uncollectible Accounts

A contra-asset account used to estimate the portion of accounts receivable that may not be collected.

Trade Accounts

Accounts used to record transactions carried out on credit between businesses, typically involving the sale of goods and services.

Aging of Accounts Receivable

An accounting process that categorizes accounts receivable according to the length of time an invoice has been outstanding to manage and collect debts effectively.

Allowance for Uncollectible Accounts

A reserve set aside in the accounting books for debts that are expected not to be collected, reflecting realistic income figures.