Question

Andrew rents rooms in his hotel for an average of $97 per night. The variable cost per rented room is $36. His fixed costs are $52,000 per month. How many rooms does he have to rent per month in order to break even?

Answer 1

853 rooms

Explanation:

If someone just opens the door with the intent to stay, Andrew has variable costs to pay which come off the 97 dollars. So his actual profit is 97 - 36 = 61 dollars. So how many rooms in total does he have to rent?

52000 / 61 = 853 rounded.

Is this realistic? The average month has 30 days

853 / 30 = 29 rooms rounded

Each room of 29 would have to be rented every night. I would say he better sell the hotel and go into something else.