Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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,

image text in transcribed
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 $60,000 and a cleaning person, Stephanie Vanderkellen, at an annual salary of $40,000. Real estate taxes are $8,825 per year. The rooms rent at an average price of $60 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and the cost of food which is $5 per person per night. Required: (a) Determine the number of rentals and the sales revenue Bob needs to breakeven using the contribution margin technique. (b) If the current level of rentals is 3,000 , by what percentage can rentals decrease before Bob has to worry about having a net loss? (c) Bob is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3 for food costs per person per night. In addition, annual fixed costs will increase by $3,175. Bob's wife Joanna feels she can increase the room rate to $68 per person per night. Determine the number of rentals and the sales revenue Bob needs to breakeven if the changes are made

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Cases An Interactive Learning Approach

Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt

3rd Edition

0131494910, 9780131494916

More Books

Students also viewed these Accounting questions

Question

How does the EEOC interpret the national origin guidelines?

Answered: 1 week ago

Question

What is the purpose of the OFCCP?

Answered: 1 week ago