Radison Blue Plaza Hotel report

Document Type:Thesis

Subject Area:Tourism

Document 1

On the other hand, cost drivers are factors or activities that increase the cost of goods and services. For instance if the Radison Hotel decides to increase the number of freebies, this means that, the cost or rather the expenses will somehow increase. This factor basically affects the marginal profit of the firm, hence making the break-even point to increase to the right; hence the net loss becomes significant. On the other hand, a variable cost is a cost that differs proportionately in regards to the cost driver’s activity. A variable cost, can alter the cost of a good or a service evenly, either by increasing or reducing its’ market price. It is therefore advisable for the heads involved to work on some trial and error initiatives while altering the three variables, which are the fixed cost, selling price and the Variable Cost.

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These important variables will help a great deal in the decision making of a company as far as price of goods or services are concerned. In order for the firm like the Radison Blue Plaza to break even easily, it needs to check and regulate their expenditure cost as well as the cost of production. This can be done for example by doing away by some of the fixed cost or rather engaging a more price friendly rates but feasibly effective at the same time. This can as well be done by checking and balancing the Variable cost as well, but they should not sacrifice quality of services or goods that much, regardless of the changes. Since its production cost will be lower than the option A it means that the customers will have to pay less so as to break even, and also get a reasonable profit.

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