Question

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Best Eastern Motel is a regional motel chain. Its rooms rent for $120 per night. The cost is $60 a room with fixed costs of $480,000. a) Determine the revenue R from renting x rooms b) Determine the cost C of renting x rooms c) Determine the profit P of renting x rooms d) Determine the break-even point and Comment e) Graph R and C together and label the break-even point. Label the fixed costs on the graph. Comment g) Determine the lower bound of the number of rooms rented that correspond to making a profit h) Graph P and label its x-intercept Comment on the relationship between the break-even point and the x intercept )If the cost can be changed such that it costs S$40 per room with fixed costs of $480,000, graph R and C together again and label the new break-even point. k) Determine whether it would be advantageous to change over to the new cost function or not? Comment

Answer 1

Solution - Room Rent per night = $120 Variable cost pell room - $60. Total Fixed cost = $480,ooo (a) Required Revenue or R = $120X from renting a roomea a (6) Determine the cost 'c' of C = $160x + 480,000) renting a rooms => a rooms . (@) Required Profit P of renting P = Roc = $51204 - (600 + 480,000) = $(601 - 480,000) (d) Required break-even pourt - A brook - Вои рой, TReлoшo = cos ice. $ 120x = '$(60% + 480,000) . a = 8,000 he. Best Eastern Motel will break even at 8,000 rooms.