Question

The Palmer 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		$ 5,800	per month
Utilities		$ 1,400	per month
Depreciation		$ 1,100	per month
Maintenance		$ 3,740	per month
Maid service		$ 14	per room
Other costs		$ 28	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 per month

rooms

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Determine the inn’s break-even point in dollars.

Break-even point

$enter the break-even point in dollars

Answer 1

Total variable cost=Maid service+Other costs

=(14+28)=$42 per room

Total fixed cost=Salaries+Utilities+Depreciation+Maintenance

=(5800+1400+1100+3740)=$12040

Contribution margin=Revenue-Variable cost  

=(70-42)=$28 per room

Breakeven=Fixed expenses/Contribution margin

=(12040/28)=430 rooms

=(430*70)=$30100