If you are not familiar with Priceline.com Inc., go to its Web site. Assume that an individual bids $60 on Priceline.com for a room in Dallas, Texas, on August 24. Assume that August 24 is a Saturday, with low expected room demand in Dallas at a Marriott International, Inc., hotel, so there is excess room capacity. The fully allocated cost per room per day is assumed from hotel records as follows:
|
Housekeeping labor cost* |
$30 |
|
Hotel depreciation expense |
42 |
|
Cost of room supplies (soap, paper, etc.) |
5 |
|
Laundry labor and material cost* |
10 |
|
Cost of desk staff |
5 |
|
Utility cost (mostly air conditioning) |
3 |
|
Total cost per room per day |
$95 |
|
*Both housekeeping and laundry staff include many part time |
|
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workers, so that the workload is variable to demand. |
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Should Marriott accept the customer bid for a night in Dallas on August 24 at a price of $60?