In: Accounting
BREAKEVEN ANALYSIS 6. You own a 10 bedroom Bed and Breakfast With the following, $ 12,000 per month mortgage payment $ 4,000 per month for the gardener and housekeeper $ 9.00 per room for soap, towels etc. $ 20.00 per room desired Net Profit Assume a 30 day month
SOLVE FOR THE FOLLOWING: a. The selling price per room per night AND the monthly breakeven point. b. The monthly breakeven point if you raise the selling price calculated in A above by $12.00. c. The monthly breakeven point if you lower the selling price calculated in A above by $3.00. d. Which of the 3 prices would you charge? What factors should you consider? e. What would your selling price and breakeven point be if you want to pay yourself $50,000 per year?
Solution:
1. Computation of Selling Price per room per night & Monthly Breakeven point
2. Computation of Monthly Breakeven Point when Selling Price in solution 1. is increased by $ 12
3. Computation of Monthly Breakeven Point when Selling Price in solution 1. is decreased by $ 3
4. Price Selection
Here, in this solution when we decide Selling price equal to $ 82.33, $ 94.33 and $ 79.33 then we have profit of $ 20 of $ 6,000, $ 32 of $ 9,600 and $ 17 of $ 5,100 in each cases respectively. Here, profit in Option II is highest hence we would select Option II of Selling Price equals to $ 94.33 per room per night.
Working Notes:
Computation of Profit when Selling Price is equal to $ 82.33 per room per night
Computation of Profit when Selling Price is equal to $ 94.33 per room per night
Computation of Profit when Selling Price is equal to $ 79.33 per room per night
5. Computation of Selling Price per room per night & Breakeven point when payment to self of $ 50,000 p.a.