The Ibrahim AI Hammadi Inn is trying to determine its break-even point. The inn has 570 rooms which rent at AED 160 a night. Operating costs are as follows: Salaries - AED 14,000 per month, Utilities - AED 3,000 per month, Rent - AED 2,400 per month, Maintenance - AED 600 per month, Maid service - AED 36 per room, Other costs - AED 44 per room.
Required:
1. Calculate CM, Calculate CMR.
2. BE in Quantity and in Sales Revenue.
3. Use CVP axiom and predict how much profit or loss the Inn will make when they sell a) 400 rooms and b) 200 rooms.
4. How many rooms do they have to sell if they want to earn AED 40,000 per month? What is their capacity? What will they have to do? Discuss what you would do.