The wayside motel has monthly fixed costs of $3,000, and its average daily rate (adr) is $25. if its variable costs per room are 40% of adr, how many rooms must be sold to break even?

Question

Gilberto Humphrey

Business

8 January, 18:45

The wayside motel has monthly fixed costs of $3,000, and its average daily rate (adr) is $25. if its variable costs per room are 40% of adr, how many rooms must be sold to break even?

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Jakobe Chan · Answer 1

I would say 6 1/2 rooms or round it off to 7 to break even. For one month, the income per room would be $25x31=$775. Of this, 40% of this or $310 would be variable expenses per room. So per room, the net income would be $775-310=$465. For the fixed cost of $3000/465 = 6.45 rooms call it 7 rooms.