Prince Rupert hotel has 20 rooms, and it charges guest $ 150 per room per night. The rate is same for the single or double bedroom. The hotel variable cost is $ 40 per occupied night.

Hotel opens every day for the year and has around 60% occupancy rate. Fixed Cost for the hotel is expected to be around $500,000.

There is an option to upgrade the hotel to 40 rooms. Doing so, Variable cost will remain constant, whereas Prince Rupert hotel will have increased Utilities. Additional utilities and other fixed cost will be an additional $ 450,000.

1. Calculate the breakeven no of nights and the margin of safety as a % if the hotel room is not upgraded.

2. Calculate the breakeven no of nights and the margin of safety (if any) if the hotel rooms are upgraded.

3. If the hotel purpose is to earn more operating profit, would it be beneficial to upgrade the hotel? Please show calculation to demonstrate your answer.

4. Assuming tax rate is 20%, and the hotel owners would like to earn $ 200,000 as net income, calculate the new occupancy rate should the hotel gets upgraded.