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