The Monthly Fixed Costs of Operating a 30-Unit Motel Are

question 127

Essay

The monthly fixed costs of operating a 30-unit motel are $28,000. The price per unit per night for next year is set at $110. Costs arising from rentals on a per-unit per-day basis are $12 for maid service, $6 for supplies and laundry, and $6 for heat and utilities.
a) Based on a 30-day month, at what average occupancy rate will the motel break even?
b) What will the motel's net income be at an occupancy rate of: (i) 40%? (ii) 30%?
c) Should the owner reduce the price from $110 to $94 per unit per night if it will result in an increase in the average occupancy rate from 40% to 50%? Present calculations that justify your answer.

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Definitions:

Archaea

A category of single-celled organisms, distinct in genetics from both bacteria and eukaryotes, frequently located in environments of extreme conditions.

Extrinsic Postzygotic

Refers to factors external to the zygote that affect the survival and reproduction of hybrids between different species, populations, or genetic backgrounds.

Genetic Drift

A mechanism of evolution where random changes in the frequency of alleles within a population occur, often having a significant impact on smaller populations.