Question

**A hotel has a rack rate of 250 and a yield of 85%. There
are 200 rooms in inventory and last year they ran 70% occupancy.
Variable costs are 35 dollars per room night sold. Fixed costs for
one year are 5 million dollars.**

Prepare an income statement for one year in the contribution
margin format.

Determine the contribution margin per unit (room night)

Calculate breakeven sales revenue

If the company expected to make 2 million in operating income,
calculate the breakeven number of room nights for one year.

Above is all the information I was given.

Answer #1

**Answer:**

1 |
Given, | |||||

Rack rate | 250 | |||||

Yield | 85% | |||||

Room | 200 | |||||

Occupancy Rate | 70% | |||||

VC | 35 | per room per night | ||||

FC | 50,00,000 | |||||

Discounted Price | 212.5 | |||||

Income statement | ||||||

Amount | ||||||

Revenue | 10858750 | |||||

Less: Variable Cost | 1788500 | |||||

Contribution Margin | 9070250 | |||||

Less: Fixed Cost | 50,00,000 | |||||

Net Income | 40,70,250 | |||||

Contribution margin per unit: | ||||||

Contribution Margin = Sales - VC | ||||||

Contribution margin per unit: | 177.5 | |||||

Break Even Point sales revenue: | ||||||

Rooms required to Break even = | Fixed Cost / Contribution per room | |||||

Break Even in rooms = | 28169.014 | |||||

Break Even in dollars = | 5985915.5 | |||||

Rooms required to be sold for 2 million of operating income | ||||||

Rooms = Fixed Cost + Operating Income/ Contribution Per Room | ||||||

Rooms required to be sold: | 39437 | Rooms | ||||

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