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 exist75 a night. Operating costs are as follows: Salaries exist5, 400 per month Utilities exist1, 100 per month Depreciation exist1, 100 per month Maintenance exist5, 150 per month Maid service exist15 per room Other costs exist30 per room Determine the inn's break-even point in number of rented rooms per month. Break-even point _________ rooms Determine the inn's break-even point in dollars. Break-even point exist __________

Answer 1

425 rooms

$31,875

Step-by-step explanation:

In this question, we are asked to calculate the the break even point per room and the break even point in dollars.

We use a mathematical approach to solve this question.

Firstly, we calculate the total fixed cost. Mathematically, the total fixed cost = Salaries + Utilities + Depreciation + Maintenance

In the question, we have identified the following;

Salaries = $5,400 per month

Utilities = $1,100 per month

Depreciation = $1,100 per month

Maintenance = $5,150 per month

Thus, total fixed cost = $5,400 + $1,100 + $1,100 + $5,150 = $12,750

Next, we proceed to calculate the contribution per unit.

Mathematically, contribution per unit = Sales - Variable cost

From the question, we can identify sales as = $75 per room

Variable cost = cost of maid service + other service = $15 + $30 = $45

Thus, contribution per unit = $75-$45 = $30

The break even point is thus calculated as Fixed cost/ contribution per room = $12,750/$30 = 425 rooms

Now, we need to calculate the value of this in dollars. In the question, we can see that rent per room is $75. The break even amount is thus = $75 * 425 = $31,875

Thus, the Breakeven point amount in dollars is $31,875