Question

The Sunland Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $80 a night. Operating costs are as follows:Salaries $5,400 per monthUtilities $1,200 per monthDepreciation $1,100 per monthMaintenance $2,140 per monthMaid service $19 per roomOther costs $37 per roomRequired:a. Determine the inn's break-even point in number of rented rooms per month.b. Determine the inn's break-even point in dollars.

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Selling price per unit= $80

Fixed costs:

Salaries $5,400 per month

Utilities $1,200 per month

Depreciation $1,100 per month

Maintenance $2,140 per month

Total= $9,840

Unitary variable costs:

Maid service $19 per room

Other costs $37 per room

Total= $56

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 9,840 / (80 - 56)

Break-even point in units= 410 units

To calculate the break-even point in dollars, we need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 9,840 / (24/80)

Break-even point (dollars)= $32,800