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. Salaries Utilities Depreciation Maintenance Maid service Other costs $9,550 per month 2,600 per month 1,500 per month 750 per month 6 per room 28 per room Determine 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 50 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 ratio

Explanation / Answer

Fixed cost = 9550+2600+1500+750 = 14400

Break even point in rooms = 14400/(52-34) = 800 rooms

Break even point = 800*52 = 41600

b) Margin of safety = (50*30*52)-41600 = 36400

Margin of safety ratio = 36400*100/78000 = 47%

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