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    Break even and simulated process

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    1.As part of their application for a loan to buy Lakeside Farm, a property they hope to develop as a bed-and-breakfast operation, the prospective owners have projected:
    Monthly fixed cost (loan payment, taxes, insurance, maintenance) $6000
    Variable cost per occupied room per night $ 20
    Revenue per occupied room per night $ 75

    a.If there are 12 guest rooms available, can they break even?
    b.What percentage of rooms would need to be occupied, on average, to break even?

    2.The drying rate in an industrial process is dependent on many factors and varies according to the following distribution.

    Minutes Relative Frequency
    3 .14
    4 .30
    5 .27
    6 .18
    7 .11

    a.Compute the mean drying time.
    b.Using these random numbers, simulate the drying time for 12 processes.
    c.What is the average drying time for the 12 processes you simulated?

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    Solution Summary

    This provides an example of working with break even analysis and finding the average of a simulated process.

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