Calculate revenue level that will provide operating income

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Reference no: EM131041014

A motel has 70 rooms it usually rents out, in the following proportions: 45% singles at: $48.00 per night 35% doubles at: $62.00 per night 20% triples at: $72.00 per night The motel has annual fixed costs of $365,000 and variable costs averages $12.00 per room occupied. a. Calculate the motel’s breakeven level. b. Calculate the revenue level that will provide operating income (before tax) of $65,000 a year. c. Calculate the revenue level necessary to provide an operating income (before tax) of $65,000, if the room rate was decreased by 15 percent. d. Calculate the revenue level necessary to provide an operating income (before tax) of $65,000, assuming the average room rate will increase by 10 percent. Variable cost per unit sold will increase to $14.00, and $30,000 per year will be spent on advertising (a part of fixed cost).

Reference no: EM131041014

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