Use this information to answer the next two questions. The following data relates to the Excelsior Hotel that provides overnight accommodation but no other services:
$\bullet$Fixed costs: $120,000 per annum.
$\bullet$Variable cost per room night sold: $10.
$\bullet$Average selling price per room: $110.
$\bullet$Annual after tax target profit: $144,000.
$\bullet$Excelsior's profit taxed at: 40%
-What annual number of rooms sold does the Excelsior Hotel have to achieve in order to achieve its target level of profit?

Question

Quizplus · Accepted Answer

To calculate the number of rooms sold required to achieve the target profit, we can use the formula:

Profit = (Selling price per room x Number of rooms sold) – (Variable cost per room x Number of rooms sold) – Fixed costs

$144,000 = ($110 x Number of rooms sold) – ($10 x Number of rooms sold) – $120,000

$144,000 + $120,000 = $100 x Number of rooms sold

$264,000 = $100 x Number of rooms sold

Number of rooms sold = $264,000 ÷ $100

Number of rooms sold = 3,600

Use This Information to Answer the Next Two Questions ∙\bullet∙ Fixed Costs: $120,000 Per Annum

Use This Information to Answer the Next Two Questions $\bullet$ Fixed Costs: $120,000 Per Annum