The Richibouctou Inn is trying to determine its break-even point. The inn has 70 rooms available that are rented at $50 a night. Operating costs are as follows:
Salaries | $10,680 | per month | Maintenance | $400 | per month | |||
Utilities | $1,950 | per month | Housekeeping service | $4 | per room | |||
Depreciation | $1,010 | per month | Other costs | $26 | per room |
Determine the inn’s break-even point in the number of rented rooms per month and dollars.
Break-even point | rooms | ||
Break-even point | $ |
If the inn plans on renting 30 rooms per day (assuming a 30-day
month), what is the monthly margin of safety in dollars and the
margin of safety ratio?
Monthly margin of safety | $ | ||
Margin of safety ratio | % |
a)
Fixed Cost = 10,680 + 1,950 + 1,010 + 400
= 14,040
Break-Even Point = FC / CMpr
= 14,040 / [50 - (26 + 4)]
Room = 702
Break-Even Point = 702 * 50
= $35,100
b)
Actual Sales = day * room * cost per night
= 30 * 30 * 50
= 45,000
BEP = 35,100
MoS = 9,900
MoSR = 22% (9,900 / 45,000)
Fixed Cost = 10680+1950+1010+400 = 14040
Contribution margin per room = 50-30 = 20
a) Break even point = 14040/20 = 702 rooms
Break even point = 702*50 = $35100
b) Margin of safety = (30*30)-702 = 198*50 = $9900
Margin of safety (%) = 198/900 = 22%
The Richibouctou Inn is trying to determine its break-even point. The inn has 70 rooms available...
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