Question

The executives of Grande Hotel wishes to obtain a desired profit of $58,000 this year. The FC of Grande is $256,000 and the hotel’s ADR is $110.00. If the UVC is 10.00% of the hotel’s ADR, how many rooms must the executives of Grande sell to reach the desired profit level including the BE in units?

Answer 1

Answer:

=  $348,888.89

Explanation:

The beak-even point (in sales ) is the level of sales revenue that produces no profit o loss, at this point , the total contribution is the same as the total fixed cost.

Sales revenue to achieve target profit

= Total fixed cost for the period + target profit / Contribution margin

Contribution margin = sales revenue - variable cost

Contribution margin (%) is the proportion of the sales revenue that is earned as contribution

For Grande Hotel,

Sales revenue is measured by the average daily rate , ADR is used in the hospitality industry to measure the amount of revenue made per room per day. It can taken to be what a manufacturer takes as selling price

Variable cost is 10% of ADR

Sales revenue to achieve target profit of $58,000

= (256,000 + 58,000)/(100-10)%

=  $348,888.89