Compute the break-even point in number of rooms

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Reference no: EM13145829

The Four Winds Hotel in downtown Phoenix has annual fixed costs applicable torooms of $9.2 million for its 600-room hotel, average daily room rates of $ 105, and average variable costsof $25 for each room rented. It operates 365 days per year. The hotel is subject to an income tax rate of 40%.

1. How many rooms must the hotel rent to earn a net income after taxes of $720,000? Of $360,000?

2. Compute the break-even point in number of rooms rented. What percentage occupancy for theyear is needed to break even?

3. Assume that the volume level of rooms sold is 150,000. The manager is wondering how much incomecould be generated by adding sales of 15,000 rooms. Compute the additional net income after taxes

Reference no: EM13145829

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