Question

Selected financial info for the Santa Inn, a 100-room property, is as follows:    ADR =...

Selected financial info for the Santa Inn, a 100-room property, is as follows:

   ADR = $60
   VC% = 30%

Monthly fixed costs:

   Operating $80,000
   Financial $10,000 (Hint: We are calculating operating leverage)

Required:

1) What is the contribution?

2) What is the contribution margin?

3) What is the monthly breakeven point in rooms sold?

4) What is the breakeven point in sales dollars?

5) Assume a paid occupancy percentage of 80%, what day of the year does the inn breakeven?

Homework Answers

Answer #1
Requirement 1
Revenue (100 rooms X$60 X 30 days) 180000
Variable cost (180000*30%) 54000
Contribution 126000
Requirement 2
Contribution margin = Contribution /Revenue
= 126000/180000
Contribution margin = 70%
Requirement 3
Contribution per room = $60-(60*30%) =$ 42 per room
Monthly Breakeven point in rooms sold
= Fixed Costs / Contribution per room
= (80000+10000)/42 = 2,143 rooms
Requirement 4
Break even point in sales dollars
= 2,143 rooms*$60 = $128,580
Requirement 5
Contribution per room = $60-(60*30%) =$ 42 per room
Yearly breakeven point in rooms sold
= Fixed Costs / Contribution per room
= ((80000+10000)*12)/42 = 25,714 rooms
Day of the year dos the inn break even
= 25714/80
= 321.43 or 322nd day
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