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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

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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.

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

Contribution per room

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Answer

To find the contribution per room, we subtract the variable costs per room from the revenue per room:

extContributionperroom=extRevenue−extVariableCosts=£84−£34=£50 ext{Contribution per room} = ext{Revenue} - ext{Variable Costs} = £84 - £34 = £50

Step 2

Monthly fixed costs

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Answer

The annual fixed costs amount to £30,000. To find the monthly fixed costs, we divide by 12:

extMonthlyfixedcosts=£30,00012=£2,500 ext{Monthly fixed costs} = \frac{£30,000}{12} = £2,500

Step 3

Break-even calculation

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Answer

To calculate the break-even point in terms of the number of rooms occupied per month, we use the formula:

extBreak−even(rooms)=extMonthlyfixedcostsextContributionperroom=£2,500£50=50extrooms ext{Break-even (rooms)} = \frac{ ext{Monthly fixed costs}}{ ext{Contribution per room}} = \frac{£2,500}{£50} = 50 ext{ rooms}

This means that 50 rooms need to be occupied each month for the business to break-even.

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