Bob Newhart operates a bed and breakfast hotel in Vermont. Depreciation on the

hotel is $$12,000$ per year. Bob employs a maintenance person, George Utley, at an

annual salary of $$48,000$ and a cleaning person, Stephanie Vanderkellen, at an

annual salary of $$36,000.$ Real estate taxes are $$15,360$ per year. The rooms rent at

an average price of $$75$ per person per night including breakfast. Other costs are

laundry service and supplies at a cost of $$9$ per person per night and the cost of

breakfast meals which is $$18$ per person per night.

Required:

$($a$)$ Determine the number of rentals and the sales revenue Bob needs to break$-$

even using the contribution margin technique.

$($b$)$ If the current level of rentals is $2,900,$ calculate the "margin of safety".

$($c$)$ Bob is considering upgrading the breakfast service to attract more business and

increase prices. This will cost an additional $$2$ for food costs per person per

night. In addition, annual fixed costs will increase by $$2,240.$ Bob's wife Joanna

feels she can increase the room rate to $$79$ per person per night. Determine

the number of rentals and the sales revenue Bob needs to breakeven if the

changes are made.