Question

The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $60 a night. Operating costs are as follows.

Salaries $8,750 per month

Utilities 2,700 per month

Depreciation 1,200 per month

Maintenance 850 per month

Maid service 8 per room

Other costs 34 per room

Determine the inn’s break-even point in (1) number of rented rooms per month and (2) dollars.
1. Break-even point in rooms

2. Break-even point $

If the inn plans on renting an average of 50 rooms per day (assuming a 30-day month), what is (1) the monthly margin of safety in dollars and (2) the margin of safety ratio? (Round ratio to 0 decimal places, e.g. 10.)

1. Margin of safety $

2. Margin of safety ratio %

Answer 1