A motel has 70 rooms it usually rents out, in the following proportions:
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45% singles at:
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$48.00 per night
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35% doubles at:
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$60.00 per night
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20% triples at:
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$72.00 per night
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The motel has annual fixed costs of $345,000 and variable costs averages $15.00 per room occupied.
a. Calculate the motel's breakeven level and its occupancy percentage.
b. Calculate the occupancy percentage that will provide operating income (before tax) of $60,000 a year.
c. Calculate the occupancy percentage necessary to provide an operating income (before tax) of $60,000, if the average room rate were decreased by 15 percent.
d. Calculate the occupancy percentage necessary to provide an operating income (before tax) of $60,000, assuming the average room rate will increase by 10 percent. Variable cost per unit sold will increase to $16.20, and $30,000 per year will be spent on advertising.