kong operates a boutique hotel in a resort area near Chenang, Langkawi. Depreciation on the hotel is 60,000 per year. kong 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 10,000 per year. The rooms rent at an average price of 60 per person per night. Other costs are laundry and cleaning service at a cost of 10 per person per night and the cost of breakfast which is 5 per person per night. Required: (a) Indicate the number of rentals and the sales revenue kong needs to break even using the contribution margin technique. (b) If the current level of rentals is 4,000, by what percentage can rentals decrease before kong has to worry about having a net loss? (c) kong is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional 3 food costs per person per night. kongfeels she can increase the room rate to 68 per person per night. Indicate the number of rentals and the sales revenue kong needs to break even if the changes are
kong operates a boutique hotel in a resort area near Chenang, Langkawi. Depreciation on the hotel is 60,000 per year. kong 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 10,000 per year. The rooms rent at an average price of 60 per person per night. Other costs are laundry and cleaning service at a cost of 10 per person per night and the cost of breakfast which is 5 per person per night. Required: (a) Indicate the number of rentals and the sales revenue kong needs to break even using the contribution margin technique. (b) If the current level of rentals is 4,000, by what percentage can rentals decrease before kong has to worry about having a net loss? (c) kong is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional 3 food costs per person per night. kongfeels she can increase the room rate to 68 per person per night. Indicate the number of rentals and the sales revenue kong needs to break even if the changes are
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![kong operates a boutique hotel in a resort area near Chenang, Langkawi. Depreciation on
the hotel is 60,000 per year. kong 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 10,000
per year. The rooms rent at an average price of 60 per person per night. Other costs are
laundry and cleaning service at a cost of 10 per person per night and the cost of
breakfast which is 5 per person per night.
Required:
(a) Indicate the number of rentals and the sales revenue kong needs to break even
using the contribution margin technique.
(b) If the current level of rentals is 4,000, by what percentage can rentals decrease before
kong has to worry about having a net loss?
(c) kong is considering upgrading the breakfast service to attract more business and
increase prices. This will cost an additional 3 food costs per person per night.
kongfeels she can increase the room rate to 68 per person per night. Indicate the
number of rentals and the sales revenue kong needs to break even if the changes are
made.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5c149693-517b-41b4-84f4-6dbb0990dc78%2Fda5ace48-393d-4d46-920c-5cb04a679967%2Fpftonzb_processed.png&w=3840&q=75)
Transcribed Image Text:kong operates a boutique hotel in a resort area near Chenang, Langkawi. Depreciation on
the hotel is 60,000 per year. kong 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 10,000
per year. The rooms rent at an average price of 60 per person per night. Other costs are
laundry and cleaning service at a cost of 10 per person per night and the cost of
breakfast which is 5 per person per night.
Required:
(a) Indicate the number of rentals and the sales revenue kong needs to break even
using the contribution margin technique.
(b) If the current level of rentals is 4,000, by what percentage can rentals decrease before
kong has to worry about having a net loss?
(c) kong is considering upgrading the breakfast service to attract more business and
increase prices. This will cost an additional 3 food costs per person per night.
kongfeels she can increase the room rate to 68 per person per night. Indicate the
number of rentals and the sales revenue kong needs to break even if the changes are
made.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education