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The K&K Motel has 100 rooms and a swimming pool. Other activities such as vending machine sales and telephone sales are operated on a breakeven

  1. The K&K Motel has 100 rooms and a swimming pool. Other activities such as vending machine sales and telephone sales are operated on a breakeven basis and may be ignored.
  1. Compute the net income expected during June (a summer month) if 80% occupancy is achieved. 
  2. Compute the breakeven point in the rooms sold during June. If 80% occupancy is achieved each night, on what day does the K&K break even? 
  3. Compute the net income expected during November (a winter month) if 70% occupancy is achieved. 
  4. Compute the breakeven point in the rooms sold during November. If 70% occupancy is achieved each night, on what day does the K&K break even? 

The K&K Motel has 100 rooms and a swimming pool. Other activities such as vending machine sales and telephone sales are operated on a breakeven basis and may be ignored.
The cost structure of the K&K differs slightly by month based on the season. The variable costs per occupied room are estimated as follows:
Housekeeping$ 4.00
Operating supplies$ 2.00
Repair and maintenance$ 1.00
Utilities (summer)$ 0.50
Utilities (winter)$ 2.00
Pool/maintenance (summer)$ 0.50
Laundry$ 1.00
Fixed Costs per month are estimated as follows:
Housekeeping - supervision$ 2,000
Front office$ 3,000
Administration$ 6,000
Depreciation$ 5,000
Pool costs (summer)$ 2,000
Utilities$ 1,000
Insurance and other$ 2,500
Assume the average income tax rate is 30% of pretax income. The average daily rate of the K&K is estimated to be $35.00.

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