As part of their application for a loan to buy Lakeside Farm, a property they hope to develop as a bed-and-breakfast operation, the prospective owners have projected: Monthly fixed cost (loan payment, taxes, insurance, maintenance) $8000 Variable cost per occupied room per night $ 25 Revenue per occupied room per night $ 75 SHOW YOUR WORK TO RECEIVE CREDIT. a. Write the expression for total cost per month. Assume 30 days per month. b. Write the expression for total revenue per month. c. If there are 12 guest rooms available, can they break even? What percentage of rooms would need to be occupied, on average, to break even?

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AyAyCapitan AyAyCapitan · Answer 1 · 2019-07-10T03:06:39+02:00

Answer:

(A)total cost = 8,000 + 25X

where X is the rooms occupied for the month

(B) revenue = 75X

where X is the rooms occupied for the month

(C)

Explanation:

(A) total cost = fixed cost + variable cost

so total cost = 8,000 + 25X

where X is the rooms occupied

(B) total revenue = total sales

so revenue = 75X

where X is the rooms occupied for the month

(C) Yes they can Break-Even with an average capacity of 44.44%

[tex]\frac{Fixed Cost}{Contribution Margin} = $Break Even Point[/tex]

BEP will be ammount of rooms occupied to cover the fixed cost for the project.

Contribution margin = revenue - variable cost

Contribution = 75 - 25 = 50

Now we solve for BEP

8,000/ 50 = 160

If there are 12 guest room they can have a capacity of 12 * 30 = 360 beds per month

BEP is at 160 so their occupied percentage during the month should be: 160/360 = .44444 = 44.44%