A motel has 70 rooms it usually rents out in the following, Ask an Expert

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A motel has 70 rooms it usually rents out, in the following proportions:

45% singles at:	$48.00 per night
35% doubles at:	$60.00 per night
20% triples at:	$72.00 per night

The motel has annual fixed costs of $345,000 and variable costs averages $15.00 per room occupied.

a. Calculate the motel's breakeven level and its occupancy percentage.

b. Calculate the occupancy percentage that will provide operating income (before tax) of $60,000 a year.

c. Calculate the occupancy percentage necessary to provide an operating income (before tax) of $60,000, if the average room rate were decreased by 15 percent.

d. Calculate the occupancy percentage necessary to provide an operating income (before tax) of $60,000, assuming the average room rate will increase by 10 percent. Variable cost per unit sold will increase to $16.20, and $30,000 per year will be spent on advertising.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91723480

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