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

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