Question \#1 Bob Newhart operates a bed and breakfast hotel in Vermont. Depreciation on the...
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Question \#1 Bob Newhart operates a bed and breakfast hotel in Vermont. Depreciation on the hotel is $12,000 per year. Bob employs a maintenance person, George Utley, at an annual salary of $48,000 and a cleaning person, Stephanie Vanderkellen, at an annual salary of $36,000. Real estate taxes are $15,360 per year. The rooms rent at an average price of $75 per person per night including breakfast. Other costs are laundry service and supplies at a cost of $9 per person per night and the cost of breakfast meals which is $18 per person per night. Required: (a) Determine the number of rentals and the sales revenue Bob needs to breakeven using the contribution margin technique. (b) If the current level of rentals is 2,900 , calculate the "margin of safety". (c) Bob is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $2 for food costs per person per night. In addition, annual fixed costs will increase by $2,240. Bob's wife Joanna feels she can increase the room rate to $79 per person per night. Determine the number of rentals and the sales revenue Bob needs to breakeven if the changes are made
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