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Case: Jane's Hotel Business Jane is an entrepreneur and about to open her first hotel. She has forecasted the following costs and revenues: Maximum number of customers per month: 800 Monthly fixed costs:10,000 Average revenue per customer: 110 Typical variable costs per customer: 90 . Some secondary market research has suggested that Jane's prices may be too low. She is considering charging higher prices, though she is nervous about the impact this might have on her forecast sales. Jane has found her break-even chartuseful during the planning of her new business, but she is concerned that it might be misleading too. a. Calculate the break-even quantity. (3 marks) b. Find the profit or loss made at a monthly sales level of 600 customers. (4 marks) C. Calculate the margin of safety at that level of output. (2 marks) d. Sketch break-even graph including margin of safety. (3 marks) e. Another option is by adding promotion efforts to attract more potential customers. However, it will incur an additional 2,000 per year of her fixed cost. Jane also needs to reduce her direct cost of 10 per customer. Calculate the break-even quantity and her expected profit or loss of 600 customers. (7 marks) f. Which option Jane should choose? Explain. (1 marks)

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