Question 1 (10 marks)

Ricks Motel has the following monthly costs in the first five months of 2019:

Month Rooms Rented Costs

January 150 $20,250

February 160 21,000

March 130 18,750

April 144 19,800

May 170 21,750

Instructions

a. Identify the fixed and variable cost elements using the high-low method.

b. The hotel management is doing a projection for June 2019. How many rooms should be rented out in order to break even, if the charge is $150 per room rented?