Use below information for Questions 7 to 10: Jane Botosan operates a bed...
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Accounting
Use below information for Questions 7 to 10:
Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60,000 per year. Jane employs a maintenance person at an annual salary of $41,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,600 per year. The rooms rent at an average price of $127 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10.6 per person per night and the cost of food which is $5.3 per person per night.
Q-7) Determine the sales revenue Jane needs to break even.
Q-8) Determine the number of rentals Jane needs to earn a target net income of $50,000.
Q-9) Jane is considering changing the business strategy. She considers installing additional cleaning machines which will decrease laundry and cleaning service per person per night by $3. However, fixed depreciation cost will increase by $4,030. Determine the number of rentals Jane needs to break even if the changes are made.
Q-10) Determine the number of rentals at which Jane would be indifferent between the current and proposed business models. (Hint: Consider net income figures.)
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