Exam 8: Cost-Volume-Profit Analysis

A hotel sells its single room nights for an average of $86 and its double room nights for an average of $102. The variable cost per single room night sold is $8 and the variable cost per double room night sold is $10. The hotel has annual fixed costs of $992,000. In the past the hotel has sold two single rooms for each double room sold. Based on the 2:1 sales mix achieved in the past, what combination of single and double room sales must be made in order for the hotel to breakeven?

Use this information to answer the next two questions. The following data relates to the Exquisite Hotel that provides overnight accommodation but no other services: Fixed costs: $252,000 per annum; Variable cost per room night sold: $14; Average selling price per room night: $84; Annual after tax target profit: $63,000; Bravo's profit taxed at: 40%. -What annual number of rooms sold does the Exquisite Hotel have to achieve in order to achieve its target level of profit?

A T-shirt retailer is planning to sell 500 T-shirts for $20 each at the next Olympics. This will generate a contribution margin ratio of 70%. If this level of sales will signify breakeven for the T-shirt retailer's operations at the Olympics, what are the retailer's fixed costs associated with selling at the Olympics.

Use this information to answer the next two questions. The following data relates to the Bravo Hotel that provides overnight accommodation but no other services: Fixed costs: $240,000 per annum; Variable cost per room night sold: $15; Average selling price per room night: $65; Annual after tax target profit: $288,000; Bravo's profit taxed at: 40%. -What annual number of rooms sold does the Bravo Hotel have to achieve in order to achieve its target level of profit?

Contribution margin is: