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Motel Rentals

Super 8, the world's largest budget hotel chain, was founded in 1972. It now has more than 120,000 rooms in more than 2,000 locations (average is 61 rooms) in the United States and Canada. Suppose a particular Super 8 has annual fixed costs of $900,000 for its 100-room motel, average daily room rents of $54, and average variable costs of $9 for each room rented. It operates 365 days per year.

1. How much net income on rooms will Super 8 generate (a) if the motel is completely full throughout the entire year and (b) if the motel is half full?
2. Compute the break-even point in number of rooms rented. What percentage occupancy for the year is needed to break even?