Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on
Question:
Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,600 per year. The rooms rent at an average price of $127 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10.6 per person per night and the cost of food which is $5.3 per person per night.
Q-7) Determine the sales revenue Jane needs to break even.
Q-8) Determine the number of rentals Jane needs to earn a target net income of $50,000.
Q-9) Jane is considering changing the business strategy. She considers installing additional cleaning machines which will decrease laundry and cleaning service per person per night by $3. However, fixed depreciation cost will increase by $4,030. Determine the number of rentals Jane needs to break even if the changes are made.
Q-10) Determine the number of rentals at which Jane would be indifferent between the current and proposed business models. (Hint: Consider net income figures.)
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118856994
4th Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly