The owners of Evening Star Motel want to know potential maximum profits and the break-even occupancy for the operation. Evening Star Motel is a budget operation to attract business people and families on low budgets. A study of costs shows a difference between summer and winter operation. Swimming pool maintenance adds to summer costs while utilities (heat and lights) add to winter costs. Variable costs have been determined on the basis of cost per room occupied per day and are set forth as follows: Cost Per Room Laundry $1.80 Heat and light (Summer) $1.00 Heat and light (Winter) $2.00 Repairs $0.75 Supplies $1.60 Taxes and insurance $4.00 Maintenance $1.50 Pool maintenance (Summer only) $0.50 Fixed costs per month of operation have been estimated as follows: Housekeeping $12,000 Management 16,000 Desk Service 2,800 Repairs and maintenance 1,400 Taxes 1,430 Insurance 1,120 Heat and light 800 Depreciation - motel 25,000 Depreciation - furnishing 12,000 Pool maintenance and personnel (Summer only) 1,750

Evening Star has 300 rooms and charges $40 per room per night. Summer is relatively short and is defined as June, July, and August. All other months are designated as winter months. A month consists of 30 days for making calculations. Maximum capacity for a month would be 9,000 room days (300 rooms x 30 days) Required: 1) Compute the MAXIMUM operating income that can be expected for ONE summer month and ONE winter month.

2) What is the breakeven point in terms of number of rooms (BE Unit) for the summer season? For the winter season? Also state the breakeven point as a percentage of total occupancy for both summer and winter.

3) Based on advanced reservations and normal expectations, Evening Star Motel plans for 5,000 room days in August. Determine the estimated operating income for August. Also determine the percentage of occupancy for August.