Question

The limited service Pepper Inn has an ADR of $80.00, UVC of $15.00, and FC of $100,000. Based on the information given, what are the number of rooms required for Pepper Inn to breakeven

Answer 1

Answer:

1339  rooms

Explanation:

ADR stands for Average dairy rate which is equivalent to the selling price

UVC is the unit variable cost

FC is the fixed cost

Using the cost -volume -analysis CVP, the break-even point is calculated using the formula

break-even is  Fixed cost/ contribution margin per unit

Fixed costs are $100,000

Contribution margin per unit = selling price - variable cost

= $80.00-$15.00

=$65

Breakeven point= $100,000/ $65

1338.46

=$1339 rooms