Exercise 22-6 (Part Level Submission) The Palmer Acres Inn is trying to determin

Question

Exercise 22-6 (Part Level Submission) The Palmer Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $145 a night. Operating costs are as follows: Salaries Utilities Depreciation Maintenance Maid service Other costs $5,900 per month $1,400 per month $1,100 per month $4,070 per mont $39 per room $77 per room ? (a) x Your answer is incorrect. Try again Determine the inn's break-even point in number of rented rooms per month Break-even point 396 rooms Attempts: 3 of 15 used SAVE FOR LATER SUBMIT ANSWER

Explanation / Answer

Total variable costs=(39+77)=$116 per room

Total fixed costs=(Salaries+Utilities+Depreciation+Maintenance)

=(5900+1400+1100+4070)=$12470

Contribution margin=Sales-Variable costs

(145-116)=$29 per room

Hence breakevenpoint=Fixed cost/Contribution margin

=(12470/29)=430 rooms.

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