Khalil operates a bed and breakfast hotel in a resort area in Jeddah. Depreciation on the hotel is $60,000 per year. Khalil employs a maintenance person at an annual salary of $32,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,000 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 $8.00 per person per night and the cost of food which is $4.00 per person per night.

1 What is Khalil's contribution margin ratio? 2. What is Khalil's break-even point in Saudi Riyal (Sales\ Revenue)? 3. If the current level of rentals is 3,000, what is Khalils margin of safety ratio?

4. Khalil is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3.00 for food costs per person per night. Khalil feels he can increase the room rate to $65 per person per night. Determine Khalils break-even point in rentals (units) and in Saudi Riyal (Sales\ Revenue) if the changes are made.