P2-35; Motel Rentals
Suppose a particular Motel 6 has annual fixed costs of $3.2 million for its 400-room motel, average daily room rents of $50, and average variable costs of $10 for each room rented.Â Â It operates 365 days per year.
- How much net income on rooms will Motel 6 generate:
(a) if the motel is completely full throughout the entire year and
(b) if the motel is half full?
- Compute the break-even point in number of rooms rented.Â Â
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