Reference no: EM13170018

Problem 1:

The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $75a night. Operating costs are as follows.

Salaries		$8,547	per month
Utilities		$1,832	per month
Depreciation		$1,221	per month
Maintenance		$610	per month
Maid service		$9	per room
Other costs		$36	per room

Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars.

(1)		Break-even point			rooms
(2)		Break-even point		$

Problem 2

Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is shown below.

Fare revenues (1,400fares)				$35,000
Variable costs
Fuel		$6,300
Tolls and parking		3,150
Maintenance		1,050		10,500
Contribution margin				24,500
Fixed costs
Salaries		12,495
Depreciation		1,176
Insurance		1,029		14,700
Net income				$9,800

(a) Calculate the break-even point in (1) dollars and (2) number of fares.

(1)		Break-even point		$
(2)		Break-even point			fares

(b) Without calculations, determine the contribution margin at the break-even point.