Need help on Breakeven question

[ProMath]

I have this question of finding a breakeven point, but my doubt is that the Fixed costs is per year while the price and variable cost are in per night.

So it is okay to just substitute in the formula? Or I should convert per year to per night?

The question:
A Best Eastern Motel is a regional motel chain. Its rooms rent for $90 per night, on average. The variable cost is $40 a room per night. Fixed costs are $1,200,000 per year. What is the breakeven point?

My solution:
BE=1200000/90-40 = 24000 units

Is that correct?

Thanks

 

[lev888]

I have this question of finding a breakeven point, but my doubt is that the Fixed costs is per year while the price and variable cost are in per night.

So it is okay to just substitute in the formula? Or I should convert per year to per night?

The question:
A Best Eastern Motel is a regional motel chain. Its rooms rent for $90 per night, on average. The variable cost is $40 a room per night. Fixed costs are $1,200,000 per year. What is the breakeven point?

My solution:
BE=1200000/90-40 = 24000 units

Is that correct?

Thanks

Can you explain your solution? What is the formula?

 

[HallsofIvy]

What is the purpose of dividing by 90? What units does 1200000/90 have?

 

[ProMath]

Can you explain your solution? What is the formula?

The formula is:
Breakeven point= Fixed cost/Selling price -Variable cost

 

[ProMath]

What is the purpose of dividing by 90? What units does 1200000/90 have?

Not 90, it is 90-40=50
So it will be:
1200000/50= 24000

 

[lev888]

The formula is:
Breakeven point= Fixed cost/Selling price -Variable cost

This doesn't look right. I think you forgot parentheses.
Can you explain how the formula works?

 

[MarkFL]

It seems to me that eithe the yearly fixed costs should be converted to a daily amount or the daily fixed costs/revenue should be converted to a yearly basis.

Equating total yearly costs to total yearly revenue (using a 365 day year) we obtain:

[MATH]1200000+365(40n)=365(90n)[/MATH]
Rounding up, we then have

[MATH]n\approx66[/MATH]

 

[ProMath]

It seems to me that eithe the yearly fixed costs should be converted to a daily amount or the daily fixed costs/revenue should be converted to a yearly basis.

Equating total yearly costs to total yearly revenue (using a 365 day year) we obtain:

[MATH]1200000+365(40n)=365(90n)[/MATH]
Rounding up, we then have

[MATH]n\approx66[/MATH]

That's exactly my question, that I should to convert.

Are you 100% sure about it?

Thanks

 

[ProMath]

The formula is:
Breakeven point= Fixed cost/Selling price -Variable cost

My question excatly is: Should I convert per year to per night?

Thanks

 

[ProMath]

Can you explain your solution? What is the formula?

This formula:
Breakeven point= Fixed cost/Selling price -Variable cost

I want to know: Should I convert per year to per night?

 

[ProMath]

What is the purpose of dividing by 90? What units does 1200000/90 have?

Not dividing by 90

It's dividing by 90-40

But my question is: Should I convert per year to per night?

 

[MarkFL]

That's exactly my question, that I should to convert.

Are you 100% sure about it?

Thanks

I can't say I'm 100% sure, but it seems to me to be the only way to approach the problem, is to put all costs and revenue on the same basis.

 

[ProMath]

I can't say I'm 100% sure, but it seems to me to be the only way to approach the problem, is to put all costs and revenue on the same basis.

Okay thanks
appreciate it.