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Compute break-even point and margin of safety The Motor Inn is trying to determine its break-even point. The inn has 75 rooms that are rented
| Compute break-even point and margin of safety | |||||||||
| The Motor Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $100 | |||||||||
| a night. Operating costs are as follows. | |||||||||
| Salaries | $10,600 per month | ||||||||
| Utilities | 2,400 per month | ||||||||
| Depreciation | 1,500 per month | ||||||||
| Maintenance | 800 per month | ||||||||
| Maid service | 5 per room | ||||||||
| Other costs | 45 per room | ||||||||
| Instructions | |||||||||
| (a) | Determine the inn's break-even point in (1) number of rented rooms per month and | ||||||||
| (2) dollars. | |||||||||
| (a)(1) | Break-even point in rooms | ||||||||
| Rental per room | |||||||||
| Variable cost per room | |||||||||
| Contribution margin per room | |||||||||
| Fixed costs | |||||||||
| Contribution margin per room | |||||||||
| Break-even point in rooms | |||||||||
| (a)(2) | Break-even point in dollars | ||||||||
| Contribution margin per room | |||||||||
| Rental per room | |||||||||
| Contribution margin ratio | |||||||||
| Break-even point in rooms | |||||||||
| Rental per room | |||||||||
| Break-even point in dollars | |||||||||
| OR | |||||||||
| Fixed cost | |||||||||
| contribution margin ratio | |||||||||
| Break-even point in dollars | |||||||||
| (b) | If the inn plans on renting an average of 50 rooms per day (assuming a 30-day month), | ||||||||
| what is (1) the monthly margin of safety in dollars and (2) the margin of safety ratio? | |||||||||
| (b)(1) | Margin of safety in dollars | ||||||||
| Actual sales | |||||||||
| Break-even Sales | |||||||||
| Margin of safety in dollars | |||||||||
| (b)(2) | Margin of safety ratio | ||||||||
| Margin of safety in dollars | |||||||||
| Actual sales | |||||||||
| Margin of safety ratio | |||||||||
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