Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Farida operates a boutique hotel in a resort area near Chenang, Langkawi. Depreciation on the hotel is RM60,000 per year. Farida employs a maintenance
Farida operates a boutique hotel in a resort area near Chenang, Langkawi. Depreciation on the hotel is RM60,000 per year. Farida employs a maintenance person at an annual salary of RM41,000 and a cleaning person at an annual salary of RM24,000. Real estate taxes are RM10,000 per year. The rooms rent at an average price of RM60 per person per night. Other costs are laundry and cleaning service at a cost of RM10 per person per night and the cost of breakfast which is RM5 per person per night. Required: (a) Indicate the number of rentals and the sales revenue Farida needs to break even using the contribution margin technique. (7 marks) (b) If the current level of rentals is 4,000, by what percentage can rentals decrease before Farida has to worry about having a net loss? (2 marks) (c) Farida is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional RM3 for food costs per person per night. Farida feels she can increase the room rate to RM68 per person per night. Indicate the number of rentals and the sales revenue Farida needs to break even if the changes are made. (4 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started