- El Romero (ER)
El Romero (ER) is a guest house that rents out single rooms. In 2025, ER will charge an average of $80 for an overnight stay, which includes meals. The variable costs of items such as food and laundry will be $30 per overnight stay. The fixed cost of operating the guest house will be (50 000 per year.
(a) Define the term fixed cost. [2]
(b) Construct a fully labelled break-even chart, to scale, for ER for 2025. [4]
(c) ER has forecasted overnight stays in 2025 to be 1460. Calculate ER’s forecasted level of profit for 1460 overnight stays in 2025 (show all your working). [2]
(d) Of the seven available rooms in the guest house, the current average (mean) occupancy per night is four, and ER’s occupancy has a standard deviation of one.
Using standard deviation, comment on ER’s current average occupancy per night. [2]