Question

The Palmer Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $58 a night. Operating costs are as follows: Salaries $5,500 per month Utilities $1,200 per month Depreciation $1,300 per month Maintenance $4,325 per month Maid service $10 per room Other costs $19 per room Determine the inn’s break-even point in number of rented rooms per month. Break-even point rooms LINK TO TEXT LINK TO TEXT Determine the inn’s break-even point in dollars. Break-even point $

Answer 1

Answer:

in roms         425

in dollars 24,650

Explanation:

Operating fixed cost

salaries                    5,500

utilities                      1,200

depreciation            1,300

maintenance           4,325

Total Fixed cost     12,325

Contribution per room:

$58 per night

-$10 maid

-$19 other

Contribution = 29

$\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units}$

12,325/29 = 425 rooms

$\frac{Fixed\:Cost}{Contribution \:Margin \:Ratio} = Break\: Even\: Point_{dollars}$

$\frac{Contribution \: Margin}{Sales \: Revenue} = Contribution \: Margin \: Ratio$

29/58 = 0.5

12,325/0.5 = 24,650

Also can be done:

BEPunits x Price per unit

425 x 58 = 24,650