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What amount of annual sales are required

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Question - The German Inn (a rooms-only property) cost its owners $3,000,000 of which they borrowed $1,500,000. The GM estimates the following costs:

Variable costs per room sold: 20 percent of ADR

Annual fixed costs:

Salaries $200,000

Insurance 20,000

Depreciation 100,000

Interest 150,000

Other 80,000

In addition, the Inn's pretax income will be taxed at an average tax rate of 25 percent.

Required:

1. What is the monthly breakeven level of sales at the German Inn?

2. What amount of annual sales are required if the owners are to earn 20 percent of their investment in the property?

Reference no: EM132229144

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