sesson. The Palmer Acres Inn is trying to determine its break-even point during

Question

sesson. The Palmer Acres Inn is trying to determine its break-even point during its off-peak season. The inrn has 50 rooms that it rents at $ 75 a night. Operating costs are as follows. Salaries Utilities Depreciation Maintenance Maid service Other costs night. perading costs $ 5,300 per month $ 1,100 per month $1,000 per month $5,230 per month $ 15 per room $ 30 per room Determine the inn's break-even point in number of rented rooms per month. Break-even point rooms Determine the inn's break-even point in dollars. Break-even point

Explanation / Answer

Break even units =Fixed Cost/Contrbution

Fixed cost =5300+1100+1000+5230 =12630

Variable Cost =15+30=45

Contrbution =70-45=30

Break even units =12630/30 = 421 Rooms

2

Break even units in $ 421*75 =31575

3

Break even sales =Fixed cost /Contribution margin

400000*7=Fixed cost /20%

Fixed cost =560000

4

Contrbution = Fixed cost + Net income =350000+100000 =450000

Sales =100000*10 =1000000

Variable cost =1000000-450000 =$550000

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