Question

A Best Eastern Motel is a regional motel chain. Its rooms rent for $90 per night, on average. The variable cost is $40 a room per night. Fixed costs are $1,200,000 per year. What is the breakeven point?

Answer 1

24,000 units

Explanation:

Breakeven point = Fixed Costs / sales price by unit - variable cost by unit

BEP = 1,200,000 / 90 - 40

BEP = 1,200,000 / 50

BEP = 24,000 units

Then we get BEP at 24,000 room during the whole year

If the chain consist of 68 motels, then they need to have full occupancy during the whole year

Answer 2

Answer: break even point (y) = 24000

Explanation:

This is quite simple to solve,

We will take a step by step calculation.

let us begin;

Given that the Room rent per night is = $90

Also the variable cost per night = $40

Total fixed cost = $1200,000

Now we are asked to solve for the Break even point;

Remember that at break even point, the Revenue = cost

Say the required revenue from renting y rooms R = $90y

The cost of renting y rooms = C = $ (40y + 1200,000)

therefore from this we have the Break even point as

$90y = $ (40y + 1200,000)

where y = 24000

cheers i hope this helps!!!!!!