Use this information to answer the next two questions. The following data relates to the Exquisite Hotel that provides overnight accommodation but no other services:
Fixed costs: $252,000 per annum; Variable cost per room night sold: $14; Average selling price per room night: $84; Annual after tax target profit: $63,000; Bravo's profit taxed at: 40%.
-What is the Exquisite Hotel's monthly breakeven in terms of room nights sold?

Question

Quizplus · Accepted Answer

To calculate the monthly breakeven in terms of room nights sold, first, we need to find the total fixed costs. The fixed costs are given as $252,000 per annum. The contribution margin per room night is the selling price minus the variable cost, which is $84 - $14 = $70. The breakeven point in room nights is the fixed costs divided by the contribution margin per room night, which is $252,000 / $70 = 3,600 room nights per year. To find the monthly breakeven, divide the annual breakeven by 12 months, which gives 3,600 / 12 = 300 room nights per month.

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