Jane Botosan operates a bed and breakfast hotel in a resort areanear Lake Michigan. Depreciation on the hotel is $60,000 per year.Jane employs a maintenance person at an annual salary of $41,000and a cleaning person at an annual salary of $24,000. Real estatetaxes are $10,700 per year. The rooms rent at an average price of$128 per person per night including breakfast. Other costs arelaundry and cleaning service at a cost of $10.7 per person pernight and the cost of food which is $5.1 per person per night.
A) Determine the sales revenue Jane needs to break even.
B) Determine the number of rentals Jane needs to earn a targetnet income of $50,000.
C) Jane is considering changing the business strategy. Sheconsiders installing additional cleaning machines which willdecrease laundry and cleaning service per person per night by $3.However, fixed depreciation cost will increase by $4,010. Determinethe number of rentals Jane needs to break even if the changes aremade.
D) Determine the number of rentals at which Jane would beindifferent between the current and proposed business models.(Hint: Consider net income figures.)
