Overlook Inn is a small bed-and-breakfast inn located in the Great Smoky Mountains of Tennessee. The charge is $50 per person for one night’s lodging and a full breakfast in the morning. The retired couple who own and manage the inn estimate that the variable expense per person is $20. This includes such expenses as food, maid service, and utilities. The inn’s fixed expenses total $42,000 per year. The inn can accommodate 10 guests each night.

Required: Compute the following:

1. Contribution margin per unit of service. (A unit of service is one night’s lodging for one guest.)

2. Contribution-margin ratio.

3. Annual break-even point in units of service and in dollars of service revenue.

4. The number of units of service required to earn a target profit of $60,000 for the year. (Ignore income taxes.)