Question

The Bramble Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $55 a night. Operating costs are as follows: Salaries $6,600 per month Utilities $1,100 per month Depreciation $900 per month Maintenance $420 per month Maid service $11 per room Other costs $22 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 rooms eTextbook and Media Determine the inn’s break-even point in dollars. Break-even point $enter the Break-even point in dollars

Answer 1

410 rooms and $22,550

Step-by-step explanation:

The computation of the break even point and in dollars is shown below:

Break even point in units is

= Fixed cost ÷ (Selling price - variable cost)

where,

Fixed cost is

= Salaries + Utilities + Depreciation + Maintenance

= $6,600 + $1,100 + $900 + $420

= $9,020

And, the selling price is $55

And the variable cost is

= Maid service + other cost

= $22 + $11

= $33

So, the break even point in points is

= ($9,020) ÷ ($55 - $33)

= 410 rooms

And the break even point in dollars is

= 410 rooms × $55

= $22,550