Question

The Carla Vista Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $70 a night. Operating costs are as follows: Salaries Utilities Depreciation Maintenance Maid service Other costs $6,000 per month $1,400 per month $1,300 per month $3,228 per month $14 per room $28 per room Determine the inn's break-even point in number of rented rooms per month. Break-even point rooms Determine the inn's break-even point in dollars. Break-even point in

Answer 1

Total variable cost = $14 + $28 = $42

Fixed costs = $6,000 + $1,400 + $1,300 + $3,228 = $11,928

Contribution margin = $70 - $42 = $28

Break-even point = Fixed costs / Contribution margin = $11,928 / $28 = 426 rooms

Break-even point in dollars = 426 rooms × $70 = $29,820