The K&K Motel has 100 rooms and a swimming pool. Other activities such as vending machin sales and telephone s
breakeven basis and may be ignored.
The cost structure of the K&K differs slightly by month based on season .
The variable costs per occupied room are estimated as follows:
Housekeeping
$
Operating supplies
Repair and maintenance
Utilities (summer)
Utilities (winter)
Pool/maintenance (summer)
Laundry
4.00
2.00
1.00
0.50
2.00
0.50
1.00
Fixed costs per month are estimated as follows:
Housekeeping supervision
$
2,000
Front office
$
3,000
Administration
$
6,000
Depreciation
$
5,000
Pool costs (summer)
$
2,000
Utilities
$
1,000
Insurance and other
$
2,500
Assume the average income tax rate is 30% of pretax income. The average daily rate
of the K7K is estimated to be $35.
Required:
1. Compute the net income during June (a summer month) if 80 percent occupancy achieved.
2. Compute the breakeven point in rooms sold during June. If 80 percent occupancy is achieved
each night, on what day does the K&K breakeven?
3. Compute the net income expected during November (a winter month) if 70 percent
occupancy is achieved.
4. Compute the breakeven point in rooms sold during November. If 70 percent occupancy is
achieved each night, on what day does the K&K breakeven?
achin sales and telephone sales are operated on

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