# Snow Geese Inn

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• Published : April 11, 2011

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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...