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The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $60 a night. Operating cost

If the inn plans on renting an average of 50 rooms per day (assuming a 30-day month), what is (1) the monthly margin of safet

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Answer #1

Contribution margin per room = 60 - 8 - 34 = 18

Total fixed cost = 8750+2700+1200+850 = 13,500

Breakeven point in rooms = Fixed cost/Contribution margin per room

= 13,500/18

= 750

Breakeven point = 750*60

= 45,000

Margin of Safety = Sales - Breakeven sales

= (50*30*60) - 45,000

= 45,000

Margin of Safety ratio = Margin of Safety/Sales

= 45,000/90,000

= 50%

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