Exercise 226 The Palmer Acres Inn is trying to determine its

Exercise 22-6 The Palmer Acres Inn is trying to determine its break-even point during its off -peak season. The inn has 50 rcoms that it rents at $55 a night. Operating costsa follows: Salaries Utilities Depreciation Maintenance Maid service Other costs $5,900 per month $1,400 per month $900 per month $930 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 Determine the inn\'s break-even point in dollars. Break-even point

Solution

Break-even point = Fixed costs / Contribution margin

Break-even point = ($5,900 + $1,400 + $900 + $930) / ($55 - $11 - $22)

Break-even point = $9,130 / $22

Break-even point = 415 rooms

Break-even point in dollars = 415 rooms × $55 = $22,825