Question: A 60-room hotel near Land's End in Cornwall incurs annual fixed costs of £360,000. The hotel is open for 365 nights in the year and charges an average room rate of £68. The variable costs associated with room occupancy are £8 per room night.
Required:
(a) At what room occupancy level would the hotel break even?
(b) At what level of sales would the hotel make a before-tax profit of £60,000?
(c) If the hotel pays 40% tax, how many rooms must be sold in order to make an after-tax profit of £72,000?