Question

Imagine that Sky High Hotel has two operating departments, which are rooms and F&B departments. Rooms and F&B departments have acquired $300,000 and $240,000 revenue respectively. Also, the VC for the rooms and F&B departments are $120,000 and $95,000 respectively. This hotel has an FC of $150,000. The management of this hotel set the sales mix structure as 80.00% for rooms department and 20.00% for the F&B department. What is total revenue that needs to be generated by only rooms department at the breakeven with a given sales mix levels?

$249,211

$199,369

$211,818

$181,562

Answer 1

	Rooms	F&B	Total
Sales	$        300,000	$       240,000	$         540,000
Variable Costs	$        120,000	$         95,000	$         215,000
Contribution margin	$        180,000	$       145,000	$         325,000

Contribution Margin ratio = $325000/540000 = 60.19%

Break Even revenue = Fixed Costs / Contribution margin ratio
= $150000 / 60.19% = $249210

Answer is a. $249211