Problem 1:
The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $75a night. Operating costs are as follows.
| Salaries |
|
$8,547 |
per month |
| Utilities |
|
$1,832 |
per month |
| Depreciation |
|
$1,221 |
per month |
| Maintenance |
|
$610 |
per month |
| Maid service |
|
$9 |
per room |
| Other costs |
|
$36 |
per room |
Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars.
| (1) |
|
Break-even point |
|
 |
rooms |
| (2) |
|
Break-even point |
|
$ |
|
Problem 2
Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is shown below.
| Fare revenues (1,400fares) |
|
|
|
$35,000 |
| Variable costs |
|
|
|
|
| Fuel |
|
$6,300 |
|
|
| Tolls and parking |
|
3,150 |
|
|
| Maintenance |
|
1,050 |
|
10,500 |
| Contribution margin |
|
|
|
24,500 |
| Fixed costs |
|
|
|
|
| Salaries |
|
12,495 |
|
|
| Depreciation |
|
1,176 |
|
|
| Insurance |
|
1,029 |
|
14,700 |
| Net income |
|
|
|
$9,800 |
(a) Calculate the break-even point in (1) dollars and (2) number of fares.
| (1) |
|
Break-even point |
|
$ |
|
| (2) |
|
Break-even point |
|
|
fares |
(b) Without calculations, determine the contribution margin at the break-even point.