Exercise 18-9 (Part Level Submission) The Palmer Acres Inn is trying to determin

Question

Exercise 18-9 (Part Level Submission) 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 S 90 a night. Operating costs are as follows Salaries Utilities Depreciation Maintenance Maid service Other costs $ 5,400 per month $ 1.500 per month $ 1,000 per month $ 3,278 per month $ 21 per room $42 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

Total variable cost per room=(21+42)=$63

Total fixed cost=(5400+1500+1000+3278)=$11178

Contribution margin=Sales-VC

=(90-63)=$27

Hence breakeven=Fixed cost/Contribution margin

=(11178/27)=414 rooms

=(414*90)=$37260

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