Exercise 18-9 The Palmer Acres Inn is trying to determine its break-even point d

Question

Exercise 18-9 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 $ 55 a night. Operating costs are as follows. Salaries Utilities Depreciation Maintenance Maid service Other costs $5,100 per month $1,400 per month $ 1,100 per month $ 1,464 per month $ 11 per room $ 22 per room Determine the inn's break-even point in number of rented rooms per month. Break-even point rooms LINK TO TEXT VIDEO: APPLIED SKILLS Determine the inn's break-even point in dollars Break-even point

Explanation / Answer

A. Break-even point in units = Fixed cost / (unit selling price - unit variable cost)

Break-even point in units = $9,064 / ($55-$33)

Break-even point in units = 412 Units

B. Break-even point in Dollars = Break-even point in units * Unit selling price

Break-even point in Dollars = 412*$55

Break-even point in Dollars = $22,660

Fixed Costs Salaries $ 5,100 Utilities $ 1,400 Depreciation $ 1,100 Maintenance $ 1,464 Total fixed costs $ 9,064

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