The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it...
Question:
The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows.
Salaries $6,200 per month
Utilities $1,100 per month
Depreciation $1,000 per month
Maintenance $100 per month
Maid service $11 per room
Other costs $28 per room
Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars.
Break even point:
Break even point is the point in the level of sales where the total expenses are equal to the revenue of the company. It is given as the total fixed costs divided by the contribution per unit.
Answer and Explanation: 1
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View this answerBreak even point = Total fixed costs / Contribution per unit
In the question,
Total fixed costs = 6200 + 1100 + 1000 + 100 = $8,400.00
Contribution...
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Break-Even Analysis: Definition & Example
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Chapter 4 / Lesson 3
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A break-even analysis utilizes a price calculation formula to determine how much product a business must sell and at what price in order to make a profit. Learn how to apply this analysis through examples with fixed and variable costs, and discover the importance of a margin of safety.
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