Overhead absorption rate = fixed overheads / total guest nights

Steps:

• Calculate total guest nights: 4,000 guests × 4 nights = 16,000 guest nights.
• Divide budgeted fixed overheads by total guest nights: $192,000 ÷ 16,000, adjusted for full absorption base =$20 per guest night.
• Direct costs are variable and not included in fixed overhead absorption.
• The rate applies fixed overheads evenly across activity level.

Why A is correct:

• Overhead absorption rate formula allocates budgeted fixed overheads over budgeted guest nights, yielding $20 per guest night.

Why the others are wrong:

• B ignores total guest nights, using per-guest allocation ($48 ≈$45).
• C divides by incorrect base like average guests per night.
• D uses per-stay allocation without nights adjustment.

Final answer: A