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Compute break-even point for The Lake Shore Inn

The Lake Shore Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $60 a night. Operatings costs are as follows:

Salaries $7,200 per month
Utilities 1,500 per month
Depreciation 1,200 per month
Maintenance 300 per month
Maid Service 8 per room
Other costs 28 per room

Determine the inn's break-even point in (1) number of rooms per month and (2) dollars

Template for Exercise 5-9

Directions: Calculate the following. Show your work.

Part 1.
Contribution margin per room

Contribution margin ratio

Fixed costs

Break-even point in rooms

Part 2.

Break-even point in dollars

Solution Preview

Part 1.
Contribution margin per room =Selling Price (rent per night) per room - variable cost per night per room
Selling Price per night per room = $60
Variable Cost per night per room = Maid Service +Other costs = ...

Solution Summary

The expert computes the break-even point for The Lake Shore Inn.

$2.19