Question

In: Accounting

B. Jane Botosan operates a Hostelworld in an area near Amsterdam. Depreciation on the hotel is...

B. Jane Botosan operates a Hostelworld in an area near Amsterdam. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,000 per year. The rooms rent at an average price of $60 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and the cost of food which is $5 per person per night.

Instructions

  1. DeterminethenumberofrentalsandthesalesrevenueJaneneedstobreak even using the contribution margin technique.

  2. If the current level of rentals is 4,000, by what percentage can rentals decrease before Jane has to worry about having a net loss?

  3. Jane is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3 for food costs per person per night. Jane feels she can increase the room rate to $68 per person per night. Determine the number of rentals and the sales revenue Jane needs to break even if the changes are made.

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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