Question 3.RQ.2.9: The Crayfield Hotel has completed its initial allocation and...
The Crayfield Hotel has completed its initial allocation and apportionment of overhead costs and has established that the total budgeted annual overhead cost of its linen services activity is £836,000.
The cost unit used to plan and control costs in the hotel is an occupied room night. The hotel expects the occupancy rate of its 400 rooms, which are available for 365 nights each year, to be 85 per cent for the forthcoming year.
To the nearest penny, the overhead absorption rate for the linen services activity is £ \boxed{ \ \ \ \ \ \ \ \ \ \ \ } per occupied room night.
Budgeted number of occupied room nights 400 rooms × 365 nights × 85% = 124,100 occupied room nights
Overhead absorption rate for linen services activity £836,000/124,100 = £6.74 per occupied room night