The Soma Inn is trying to determine its break-even point. The inn has 75 rooms t

Question

The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $52 a night. Operating costs are as follows.

a.)Determine the inn’s break-even point in (1) number of rented rooms per month and (2) dollars.

b.)If the Inn plans to renting an average of 50 rooms per day (assuming a 30-day onth), what is (1) the monthly margin of safety dollars and (2) the margin of safety ratio?

Salaries $8,800 per month Utilities 2,200 per month Depreciation 1,600 per month Maintenance 900 per month Maid service 6 per room Other costs 28 per room

Explanation / Answer

The Soma Inn BEP Analysis Amt $ Salaries $8,800 per month Utilities 2,200 per month Depreciation 1,600 per month Maintenance 900 per month Total Fixed costs $13,500 per month Maid service 6 per room Other costs 28 per room Total variable cost 34 per room a. e Room Rent /room 52 f Variable cost/room 34 g Contribution /room 18 h Total Fixed cost/month $13,500 i Break even room no. per month =h/g=             750 j Break even dollars per month =e*i=       39,000 b. If 50rooms rented per day, monthly no of rooms rented =30*50=          1,500 Room Rent /room 52 k Total Revenue in month       78,000 l Break even sales in $       39,000 m Margin of safety in $ = k-l       39,000 n Margin of safety ratio =m/k% 50%

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