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Minchanka [31]
2 years ago
5

The Sheridan Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rent

s at $36 a night. Operating costs are as follows:
Salaries $4,000 per month
Utilities $1,500 per month
Depreciation $1,300 per month
Maintenance $832 per month
Maid service $6 per room
Other costs $12 per room

Required:
a. Determine the inn's break-even point in number of rented rooms per month.
b. Determine the inn's break-even point in dollars.
Business
1 answer:
padilas [110]2 years ago
8 0

Answer:

Results are below.

Explanation:

<u>First, we need to calculate the unitary variable cost and the fixed costs:</u>

Unitary variable cost= 6 + 12= $18

Total fixed costs= 4,000 + 1,500 + 1,300 + 832

Total fixed costs= $7,632

<u>Now, to calculate the break-even point both in units and dollars, we need to use the following formulas:</u>

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 7,632 / (36 - 18)

Break-even point in units= 424 per month

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 7,632 / (18/36)

Break-even point (dollars)= $15,264

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