The Cullumber Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $100 a night. Operating costs are as follows:
Salaries | $7,500 | per month | |
---|---|---|---|
Utilities | $1,000 | per month | |
Depreciation | $1,100 | per month | |
Maintenance | $2,940 | per month | |
Maid service | $24 | per room | |
Other costs | $46 | per room |
Determine the inn’s break-even point in number of rented rooms per month.
Break-even point |
enter the break-even point in number of rented rooms |
rooms |
eTextbook and Media
Determine the inn’s break-even point in dollars.
Break-even point in |
$enter the break-even point in dollars |
Room rent = $100
Variable costs per room = (Maid service + Other costs) = $24 + $46 = $70
Contribution Margin per room = ($100 - $70) = $30
Contribution margin ratio = Contribution margin / price = $30 / $100 = 0.30
Total Fixed costs = (salaries + Utilities + Depreciation + Maintenance) = ($12,540)
Break Even point = Fixed cost / contribution Margin per unit
$12,540 / $30
= 418 rooms
Break-even point in dollars
= Fixed cost / Contribution margin ratio
= $12,540 / 0.30
= $41,800
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