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Using the information in Extract G, calculate how many rooms need to be occupied each month for the business to break-even - Edexcel - A-Level Business - Question 2 - 2022 - Paper 2

Question 2

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Using the information in Extract G, calculate how many rooms need to be occupied each month for the business to break-even. Revenue per room per night: £84 Variable... show full transcript

Worked Solution & Example Answer:Using the information in Extract G, calculate how many rooms need to be occupied each month for the business to break-even - Edexcel - A-Level Business - Question 2 - 2022 - Paper 2

Step 1

Calculate Contribution per Room

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Answer

The contribution per room is calculated as:

$Contribution = Revenue - Variable \ Costs$

Substituting the given values:

$Contribution = 84 - 34 = 50 \text{ (per room)}$

Step 2

Calculate Monthly Fixed Costs

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Answer

The monthly fixed costs can be calculated by dividing the annual fixed costs by 12:

$Monthly \ Fixed \ Costs = \frac{30000}{12} = 2500$

Step 3

Calculate Break-even Point in Rooms

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Answer

The break-even point in terms of the number of rooms needed can be calculated by dividing the monthly fixed costs by the contribution per room:

$Break-even = \frac{Monthly \ Fixed \ Costs}{Contribution \ per \ Room}$

Substituting the calculated values:

$Break-even = \frac{2500}{50} = 50 \text{ rooms per month}$

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