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Meyer's Motor Court: Break Even or Outsource

Susan Meyer, owner/manager of Meyer's Motor Court in Key West, is considering outsourcing the daily room cleanup for her motel to Duffy's Maid Service. Susan rents an average of 50 rooms for each of the 365 nights (365*50 equals the total rooms rented for the year). Susan's cost to clean a room is \$12.50. The Duffy's Maid Service quote is \$19 per room plus a fixed cost of \$25,000 for sundry items such as uniforms with the motel's name. Susan's annual fixed cost for space equipment, and supplies is \$60,000.

1) Based on the given information related to costs for each of the options, the break-even point for Susan = _____ room nights?

2) If the # of room nights is less than the Break Even Point shen should Susan outsource or not outsource?

Hi,
I do not need the to know the cost she should charge per room to break even.
I need the break even point that shows at how many rooms per night, it would cost Susan the same amount to clean the room herself as it would to pay Maid Service to do it.

Solution Summary

The solution determines the break even or outsource for Meyer's Motor Court.

\$2.19