Financial Analysis: Snow Geese Inn

Only available on StudyMode
  • Download(s) : 341
  • Published : April 11, 2011
Open Document
Text Preview
Snow Geese Inn

Last year:
Rev = $30,000
FC = $27,239 ($34,739 - $7,500)
VC = $10.56 per unit ($30,000 rev/$85 per room = 353 rooms  $3,729 VC/353rooms)

Break-even – 85x = 10.56x + 27239 + 0
74.44x = 27239
x = 366 rooms

Max profit – (365 days *6 rooms = 2190 rooms available)
($85 per room*2190 rooms = $186150 revenue)
R 186150.00
- VC (23126.40)
CM 163023.60
- FC (27239.00)
Profit $135,784.60

Last year – R 30000.00
- VC (3727.68)
CM 26272.32
- FC (27239.00)
Profit ($966.68)

With Maggie:
FC = $34,739
VC = 10.56 per unit ≤ 294 rooms
40.31 per unit > 295 rooms
(Maggie is paid 35% of revenue over $25,000  25000/85 = 294 rooms)

Break – even – 85x + (85*294) = (10.56*294) + (40.31x) + 34739
44.69x = 12853.64
x = 288 + 294
x = 582


1.Before Maggie began working for Phil and Carol, breakeven for the Snow Geese Inn was 366 rooms. During the year there were revenues of $30,000, variable costs of $3,727 and fixed costs of $27,239, the couple had a loss of $966.68. The maximum profit that could have been made was $135,784.60 – this can be found by figuring out maximum capacity and plugging it into the equation (365 days a year times 6 rooms = 2190 rooms available per year). 2.When Maggie started working for Phil and Carol breakeven changed to 582 rooms. Maggie is paid commission of 35% of revenue over $25,000, which means that when more than 294 rooms are sold she makes a commission and the variable cost of the Inn increases. Occupancy rates are projected to be around 30 – 35%, making it a possibility for the Inn to break-even while having Maggie as an employee (maximum capacity is 2190 rooms, times 30% = 657 rooms). However based on last year’s performance of 353 rooms being sold, it is unlikely that Phil and Carol will be able to sell enough units to break-even. 3.The Inn would be able to break-even with...
tracking img