A hotel sells its single room nights for an average of $86 and its double room nights for an average of $102. The variable cost per single room night sold is $8 and the variable cost per double room night sold is $10. The hotel has annual fixed costs of $992,000. In the past the hotel has sold two single rooms for each double room sold. Based on the 2:1 sales mix achieved in the past, what combination of single and double room sales must be made in order for the hotel to breakeven?

Question

Quizplus · Accepted Answer

The hotel must sell 8,000 single rooms and 4,000 double rooms to breakeven. This is because the variable cost per single room night sold is $8 and the variable cost per double room night sold is $10. The hotel has annual fixed costs of $992,000. The hotel sells its single room nights for an average of $86 and its double room nights for an average of $102. So, the hotel will make a profit if it sells more than 8,000 single rooms and 4,000 double rooms.

A Hotel Sells Its Single Room Nights for an Average