E5-9 Compute break-even point The Palmer Acres Inn is trying to determine its br
ID: 2563395 • Letter: E
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E5-9 Compute break-even point 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 $60 a night. Operating costs are as follows. Salaries $5,900 per month Utilities $1,100 per month Depreciation $1,000 per month Maintenance $100 per month Maid Service $14 per room Other costs $28 per room Instructions Determine the inn's break-even point in (a) number of rented rooms per month and (b) dollars. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . When you have completed E5-9, consider the following additional question. 1. Assume that total fixed costs changed to $8,750 per month and the rental rate per room for a night changed to $65. Show impact of these changes have on the calculations. E5-9 Compute break-even point 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 $60 a night. Operating costs are as follows. Salaries $5,900 per month Utilities $1,100 per month Depreciation $1,000 per month Maintenance $100 per month Maid Service $14 per room Other costs $28 per room Instructions Determine the inn's break-even point in (a) number of rented rooms per month and (b) dollars. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .Explanation / Answer
1 Unit contribution margin = 60-14-28= 18 Fixed costs = 5900+1100+1000+100= 8100 Break-even point = Fixed csts/Unit contribution margin = 8100/18= 450 Break even point in dollars = 450*60= 27000 2 Unit contribution margin = 65-14-28= 23 Fixed costs = 8750 Break-even point = Fixed costs/Unit contribution margin = 8750/23= 380 Break even point in dollars = 380*65= 24700
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