Exercise 19-1 The Sóma Inn is trying to determine its bresak-even point. The inn
ID: 2523654 • Letter: E
Question
Exercise 19-1 The Sóma Inn is trying to determine its bresak-even point. The inn has 75 rooms that ere rented at $56 a night. Operating costs are as follows. $10,600 per month Salaries Utilities Depreciation Maintenance Maid service Other costs 2,600 per month 1,400 per month 700 per month 7 per room 31 per room ine the inn's break-even point in (1) number of rented rooms per month and (2) dollars 1. Break-even point in rooms 2? Break-even point LINK TO TEXT If the inn plans on renting an average of S0 rooms per day (assuming a 30-day month), what is (1) the monthly margin of safety in dollars and (2) the margin of safety ratio? (Round ratio to O decimal places, e.g. 10.) 1. Margin of safety 2. Margin of safety ratioExplanation / Answer
Solution -2:
Part-1: Increased Selling Price by 10% : $62,500
= 5000 * (63 plus 10%)
= 346,500
= 346,500 – 213,000 – 71,600
= $62,500
Part-2: Reduce variable cost to 59% of sales : $57,550
Sale Revenue = $315,000
Variable Cost (59%) = $185,850
Fixed Cost = $71,600
Net Income = Revenue – Variable cost – Fixed Cost
= 315,000 – 185,850 - $71,600
= $57,550
Part- 3: Reduce fixed cost by $24,000 : $54,400
New Fixed cost = $71,600 - $24,000 = $47,600
Net Income = Revenue – Variable cost – Fixed Cost
= 315,000 – 213,000 - $47,600
= $54,400
Part-4: First Course of action is better since it gives a higher income of $62,500
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