As part of their application for a loan to buy Lakeside Farm, a property they ho

Question

As part of their application for a loan to buy Lakeside Farm, a property they hope to develop as a bed-and breakfast operation, the prospective owners have projected: 4. $6000 Monthly fixed cost (loan payment, taxes, insurance, maintenance) Variable cost per occupied room per night Revenue per occupied room per night $ 75 30 a. Write the total cost model for the month. (Assume 30 days per month). b. Write the total revenue model per month. (Assume 30 days per month). If there are 12 guest rooms available, can they break even? How many rooms would need to be occupied per night to break even? c. le

Explanation / Answer

ANS:

a.C(x) = 6000 + 20(30)x(monthly)

b.R(x) = 75(30)x(monthly)

c.Break-even occupancy = 3.64 or 4 occupied rooms per night, so they have enough rooms tobreak even. This would be a 33% occupancy rate.

PTS:1 TOP:Break-even analysis

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