Problem: Suppose a particular Motel 6 has annual fixed costs of $3.2 million for its 400-room motel, average daily room rents of $50, and average variable costs of $10 for each room rented. It operates 365 days per year.
Q1. How much net income on rooms will Motel 6 generate (a) if the motel is completely full throughout the entire year and (b) if the motel is half full?
Q2. Compute the break-even point in number of rooms rented. What percentage occupancy for the year is needed to break even?