Exercise 59 The Palmer Acres Inn is trying to determine its

Exercise 5-9 The Palmer Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that i rents at $140 a night. Operating costs are as follows: Salarles Utilities Depreciation Maintenance Mald service Other costs $7,000 per month $1,000 per month $900 per month $2,804 per month $38 per room $74 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 in s

Solution

Total fixed cost=(Salaries+Utilities+Depreciation+Maintenance)

=(7000+1000+900+2804)=$11704

Variable costs=(Maid service+Other costs)

=(38+74)=$112

Contribution margin=Service revenue-Variable costs

=(140-112)=$28 per room

Hence breakeven point=Fixed cost/Contribution margin

=(11704/28)=418 rooms

=(418*140)=$58520.