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Use below information for Questions 7 to 10: Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on
Use below information for Questions 7 to 10: Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,600 per year. The rooms rent at an average price of $126 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10.6 per person per night and the cost of food which is $5.5 per person per night. Q-7) Determine the sales revenue Jane needs to break even. Q-8) Determine the number of rentals Jane needs to earn a target net income of $50,000. (Do NOT round the rental number to integer. Refer to the course slides for the calculation of Target Net Income.) Q-9) Jane is considering changing the business strategy. She considers installing additional cleaning machines which will decrease laundry and cleaning service per person per night by $3. However, fixed depreciation cost will increase by $4,050. Determine the number of rentals Jane needs to break even if the changes are made. (Do NOT round the rental number to integer.) Q-10) Determine the number of rentals at which Jane would be indifferent between the current and proposed business models. (Do NOT round the rental number to integer. Hint: Consider net income figures.)
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