Problem 7 The Double A Inn, owned by Alex and Andy Roof, includes a forty-room l
ID: 2516813 • Letter: P
Question
Problem 7 The Double A Inn, owned by Alex and Andy Roof, includes a forty-room lodging ope and coffee shop. The average annual revenue and variable expense figures for years have been as follows: the past two Rooms Coffee Shop Revenue Variable expenses $600,000 120,000 $400,000 200,000 The fixed costs are as follows: Rooms department Coffee shop Overhead $50,000 60,000 300,000 Required: 1. Assuming the sales mix remains constant, calculate the following The annual revenue at the breakeven point. a·Explanation / Answer
Rooms Coffee shop Total Revenue 600000 400000 1000000 Variable expenses 120000 200000 320000 Contribution margin 480000 200000 680000 Overall Contribution margin ratio = 680000/1000000 = 68% Annual revenue at break even = Fixed expenses/CM ratio=(50000+60000+300000)/68%= $602941