Study Appendix 2B. The Regal Hotel in downtown Phoenix has annual fixed costs applicable to rooms of $8.7 million for its 570-room hotel, average daily room rates of $90, and average variable costs of $42 daily for each room rented. It operates 365 days per year. The hotel is subject to an income tax rate of 25%.
1. How many rooms must the hotel rent to earn a net income after taxes of $801,000? Of $400,500?
2. Compute the break-even point in number of rooms rented. What percentage occupancy for the year is needed to break even?
3. Assume that the volume level of rooms rented is 200,000. The manager is wondering how much income could be generated if 6,000 additional rooms are rented. Compute the additional net income after taxes.

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