Question

You are the RM at Purple Resorts. Jenny is the property’s DOSM and Danny is the FOM. All three

serve on the hotel’s RM boards committee headed by the DOSM. The hotel has 125 rooms that it

can serve provide to customer per night stay. Last year records show that the hotel usually has 92%

occupancy for the New year holiday season from 28th December till 2nd January every year. The

rooms are to sell at a rack rate of $129.99 per night.

Danny has been approached by the Australian Cricket Association to block 100 rooms (80%

Occupancy every day from 28th December till 2nd January for $109.99 per room. Purple Resorts

Australia RM Committee are planning to find out whether Danny’s offer would be beneficial or

should they open for business as usual to operate with the forecasted 92% occupancy. The RM

committee requires you to differentiate explain which of their costs are fixed and variable and any

recommendations to change from the variable to fixed costs or would that be better to stay as

variable costs according to the cost behaviour and driver.

Forecasted Expenses for the period 28th Dec 2020 - 3rd Jan 2021 Full time staff Salary Casual staff wages Electricity charges water charges Guests laundry charges @ 100 % occupancy Room Cleaning charges @ 100 percent occupancy phone and internet charges yearly charges weekly bank charges $ $ $ $ $ $ $ $ 28,000.00 14,000.00 4,800.00 5,600.00 1,522.00 9,132.00 31,200.00 280.00

Required:

The DOSM, head of the RM committee has asked you to prepare the following and submit a report

to the RM committee with the following requirements below to decide

1. The Break-even units in rooms and dollars ( 4 marks)

Answer 1

2800 plution Option - L Australian Cricket no rooms | 25 room Option merrelly -2: Normal occupancy 92.c: IIS rooms Giren expenses for 7 (week) days $ Full time staff salary fixed Casual staff Variable (140220 2200 ) 140000 Perday Electricity charges Fixed Water Charges Fixed Guest laundry charges Variable (1522 927. 2 1460.24) Room Cleaning charges Variable (9133 12/= 840143 Phone & net Variable charges Variable Weekly Bank Changes * 4800 5600 1522 1132 4200 31200 x] 4200 52 /280 40 per مملح Option 1 Option 2 85492.5 12418-15 89693.1 1494885 (1200) (1522) (9132) (3600) (1Qon) (1401-24) (8401.44 (3600) Sales Room (109.99 x TUD + 129.99X25)x6 ( 129.99 x 115)x6 less : Variable Expenses Staff wases (comx) Guest laundery Room Cleaning (4800 x ). Bank Charges (40x6) Contribution less: fixed Cost (260w +4860 + 5600) Profit Phone & Neh Charger (240) 58998.5 (38400) (240) 64051.42 (3840 20598.5 25651-42

BEP (in units) -> po 2 fixed Cost Contribution Option - Given, Contribution (a) = 58998.5 No. of roomell) 125x6 = 750 Contribution pu (a b) = 78.66 Option- 2 64051.42 115x62 690 93.48 BEP (in units) 38400 78.66 488 room 38400 93.48 411 room days BEP (in B) P/V ratio fined Cost / PIV ratio Contribution x Sales Option I Option a P/V ratio e 58998.5 xD 64501.428 100 89693:1 85492.5 2 69.017 71.917. 38400 38400 BEPlio $) 69.01. 71.91% 55644.11 $ 53400 &

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