Question

Please show all work

A newly opened bed-and-breakfast projects the following Fixed costs 1. $8000 Variable cost per occupied room per night Revenue per occupied room per night a. Write the expression for total cost b. Write the expression for total revenue c. How many rooms would have to be occupied to break even? d. Graph the Cost and Revenue equations e. What is the profit if 80 rooms are rented out? f. What is the breakeven if price per room dropped to $40 $165 $120?

Answer 1

a)

Total Cost = Fixed Cost + Quantity *Variable Cost per Occupied room

Total cost = 8000 + 40*Q

Q = Quantity (Occupied rooms)

b)

Total Revenue = Revenue *Occupied Rooms = 165*Q

c)

Break=even Point = Fixed cost/(Selling Price – Variable Cost) = 8000/(165-40) = 63.49 or 63 Rooms

e)

Q = 80 Rooms

Profit = (Revenue-Variable cost)*Q – Fixed cost = (165-40)*80 – 8000 = 2000

f)

If Revenue = 120

Break-even Point = Fixed cost/(Selling Price – Variable Cost) = 8000/(120-40) = 100