Question

need help answering these with workout shown please

5-Star Lux Hotel Hotel Configuration Total Bed 1 Bed 2 Bed 3 (Single) (Double) (Penthouse) 30 60 20 1 1 area per room (square metres) number of rooms first floor - 240 square metre second floor - 240 square metre third floor - 240 square metre number of rooms floor space square metres) planned occupancy rate (%) (open 365 days) average selling price (Stroom/night) 1 3 4 3 4 3 4 9 12 180 360 60% 70% 220.00 350.00 3 180 50% 700.00 24 720 63% 345.00 Budgeted Income Statement Total Bed 1 Bed 2 Bed 3 (Single) (Double) (Penthouse) $ $ $ 433.620 1,073,100 383,250 $ 1,889,970 78,052 193.158 65.043 160.965 143.095 354,123 290.525 718,977 68.985 57.488 126,473 256,778 340,195 283.496 623,690 1.266,280 Accommodation Revenue Cost of Goods Sold Staff costs Purchases (toiletries, sheets, towels etc.) Total Cost of Goods Sold Gross Profit Operating Expenses Administration Costs Marketing Costs Utilities cost Maintenance cost Other operating expenses Total Operating Expenses Net Profit (s) 50.000 100,000 21.681 53.655 18,409 42.993 48,026 114,579 75.000 150,000 213.115 461,227 77.410 257,750 50.000 19.163 16,898 43,493 75,000 204,553 52.225 200,000 94499 78,299 206,097 300,000 878,895 387,385 staff cost are estimated to be 18% of accommodation revenue 2 purchases are estimated to be 15% of accommodation revenue marketing costs are estimated to be 5% of accommodation revenue Administration costs of $200,000 are allocated based on floor space s utilities cost has an allocation of $30 per square metre floor space plus 3% of accommodation revenue maintenance cost has an allocation of $50 per square metre floor space plus 9% of accommodation revenue Other operating expenses of $300,000 are allocated based on floor space

Answer 1

a)

Particulars Bed 1 Bed 2 Bed 3 Total

Sales 433,620 1,073,100 383,250 1,889,970

Less:

Variable Costs 216,811 536,550 191,627 944,988     

Contribution 216,809 536,550 191,623 944,982

Less:

Fixed Costs 139,400 278,800 139,400 557,600

Operating Profit 77,409   257,750 52,223 387,382

Calculation of Total Variable Costs

Particulars Bed 1 Bed 2 Bed 3 Total

Staff Costs 78,052 193,158 68,985 340,195

Purchases 65,043 160,965 57,488 283,496

Marketing Costs 21,681   53,655 19,163 94,499

Utilties Cost 13,009 32,193 11,498 56,699

Maintenance Costs 39,026 96,579 34,493 170,097

Total 216,811 536,550 191,627 944,988

Calculation of Total Fixed Costs

Particulars Bed 1 Bed 2 Bed 3 Total

Administration Costs   50,000 100,000 50,000 200,000

Utilities Cost 5,400 10,800 5,400 21,600

Maintenance Costs 9,000 18,000 9,000 36,000

Other operating Exp. 75,000 150,000 75,000 300,000

Total 139,400 278,800 139,400 557,600

b)

Calculation of sales mix

Bed 1 = Bed 1 revenue / total revenue = 433,620 / 1,889,970 = 22.94%

Bed 2 = Bed 2 revenue / total revenue = 1,073,100/ 1,889,970 = 56.78%

Bed 3 = Bed 3 revenue / total revenue = 383,250 / 1,889,970 = 20.28%

Contribution margin ratio = 50% for every bed type( It is calculated by dividing total contribution by total sales)

c)

Calculation of weighted average contribution margin per night stay

= contribution per room * occupancy ratio

= (110*60%)+(175*70%)+(350*50%)

= 66 + 122.5 + 175

=363.5

Total WACM = Total Contribution * Occupancy ratio

= (216,809*60%)+(536,550*70%)+(191,623*50%)

= 130,085 + 375,585 + 95,812

= 601,482

d)

Break Even Point = Fixed Cost / Contribution ratio

Total = 557,600 / 50% =$ 1,115,200

Calculation of number of night stays for break even = Fixed Cost / Contribution per room

Bed 1 139,400/110 = 1267.27 night stays

Bed 2 278,800 /175 = 1593.14 night stays

Bed 3 139,400 / 350 = 398.29 night stays

e)

Margin of safety per room type = Profit / Contribution per room

Bed 1 77,409/110 = 703.73 night stays

Bed 2 257,750 /175 = 1472.86 night stays

Bed 3 52,223 / 350 = 149.21 night stays

f)

Total Sales required for profit of $500,000

= (Fixed cost + desired profit)/Contribution margin ratio

= (557,600 + 500,000) / 50%

= 1,057,600 / 50%

= $2,115,200

Distribution using sales mix, we will get total amount of sales required to be done for each type of bed.

Bed 1 = $2,115,200 * 22.94%=$485,226.88

Bed 2 = $2,115,200 * 56.78% = $1,201,010.56

Bed 3 = $2,115,200 * 20.28% = $ 428,962.56

Calculation of number of beds to be occupied

= Revenue / Selling price of each

Bed 1 = $485,226.88 / 220 = 2,205.58

Bed 2 = $1,201,010.56 / 350 = 3,431.46

Bed 3 = $ 428,962.56 / 700 = 612.80

Calculation of occupancy rate

= Number of bed required to be occupied / Total rooms

Bed 1 = 2,205.58 / (9*365) = 67.14%

Bed 2 = 3,431.46 / (12*365) = 78.34%

Bed 3= 612.80 / (3*365) = 55.96%