The Richibouctou Inn is trying to determine its break-even point. The inn has 77

Question

The Richibouctou Inn is trying to determine its break-even point. The inn has 77 rooms available that are rented at $54 a night. Operating costs are as follows: Salaries Utilities Depreciation 2,110 per month 2,010 per month Housekeeping service Other costs $460 per month 7 per room 20 per room Determine the following for the inn: Determine the inn's break-even point in the number of rented rooms per month and dollars Break-even point Break-even point roomS If the inn plans on renting 26 rooms per day (assuming a 30-day month), what is the monthly margin of safety in dollars and the margin of safety ratio? (Round margin of safety ratio to 2 decimal places, eg. 15.75%.) Monthly margin of safety Margin of safety ratio

Explanation / Answer

Fixed cost = 6220+2110+2010+460 = 10800 per month

Variable cost per room = 27 per room

Break even point = 10800/(54-27) = 400 room

Break even point = 400*54 = $21600

b) Margin of safety = (26*30-400)*54 = $20520

Margin of safety ratio = 20520*100/42120 = 48.72%

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