Question

Lux Hotel 5-Star Hotel Configuration

Gmac C Get C Lux New Tab G how + M Total M Inbc M Inbo M Inbo в Торі S BUS EX Exar O Mail G adva Para G che Get C Lux + + c File C:/Users/Manpreet/Desktop/mgt%20&%20cost%20acing/BUSN9117%20Assignment%20Part%202.pdf Hotel Configuration Bed 1 Bed 2 Bed 3 (Single) (Double) (Penthouse) area per room (square metres) 20 30 60 number of rooms first floor - 240 square metre 3 4 1 second floor - 240 square metre 3 4 1 third floor - 240 square metre 3 4 number of rooms 9 12 3 floor space (square metres) 180 360 180 planned occupancy rate (%) (open 365 days) 60% 70% 50% average selling price ($/room/night) 220.00 350.00 700.00 1 1 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 57,488 126,473 340,195 283,496 623,690 256,778 1,266,280 Accommodation Revenue Cost of Goods Sold Staff costs Purchases (toiletries, sheets, towels etc.)2 Total Cost of Goods Sold Gross Profit Operating Expenses Administration Costs 3 Marketing Costs Utilities cost 5 Maintenance cost Other operating expenses 7 Total Operating Expenses Net Profit ($) 50,000 21,681 18,409 48,026 75,000 100,000 53,655 42,993 114,579 50,000 19,163 16,898 43,493 75,000 204,553 52,225 200,000 94,499 78,299 206,097 300,000 150,000 213,115 461,227 77,410 257,750 878,895 387,385 Type here to search W ENG 3:05 AM 18/09/2020 8

1 staff cost are estimated to be 18% of accommodation revenue

2 purchases are estimated to be 15% of accommodation revenue

3 marketing costs are estimated to be 5% of accommodation revenue

4 Administration costs of $200,000 are allocated based on floor space

5 utilities cost has an allocation of $30 per square metre floor space plus 3% of accommodation revenue

6 maintenance cost has an allocation of $50 per square metre floor space plus 9% of accommodation revenue

7 Other operating expenses of $300,000 are allocated based on floor space

Required:

(a) Reconstruct the income statement using the contribution margin format, clearly show separate columns for each room type and maintaining a total column.

(b) Calculate sales mix (based on accommodation revenue) for Lux Hotel.

(c) Calculate the weighted average contribution margin (WACM) per night stay of each room type and total WACM.
(d) Determine the overall break-even level of rooms and number of night stay of each room type.

(e) Calculate the margin of safety per room type. (6 marks) (f) Suppose that Lux Hotel desires to earn a $500,000 profit. Determine the occupancy rates required to earn the desired profit.

Answer 1

A)Annual Income statement of Lux Hotel 5 star Hotel
	Bed 1	Bed 2	Bed 3	Total
Accomodation Revenue(1)	4,276,800.00	31,752,000.00	11,340,000.00	47,368,800.00
(area per room*no of rooms*floor space*planned occupancy*avg selling price)
Cost of goods sold
Staff costs (18%* (1))	769,824.00	5,715,360.00	2,041,200.00	8,526,384.00
Purchse costs (15%*(1))	641,520.00	4,762,800.00	1,701,000.00	7,105,320.00
Total Cost of Goods Sold	1,411,344.00	10,478,160.00	3,742,200.00	15,631,704.00
Contribution Margin(accomodation rev less cost of goods sold)	2,865,456.00	21,273,840.00	7,597,800.00	31,737,096.00
Operating expenses
Administration cost(on the basis of floor space)(1:2:1)	50,000.00	100,000.00	50,000.00	200,000.00
Marketing cost (5%(1))	213,840.00	1,587,600.00	567,000.00	2,368,440.00
utilities cost(($ 30 * per square metre floor space)+3%*(1))	133,704.00	963,360.00	345,600.00	1,442,664.00
maintenance cost (($ 50 per square metre floor space)+9%* (1))	393,912.00	2,875,680.00	1,029,600.00	4,299,192.00
Other operating expenses	75,000.00	150,000.00	75,000.00	300,000.00
Total Operating Cost	866,456.00	5,676,640.00	2,067,200.00	8,610,296.00
				-
Net Profit (contribution less operating exp)	1,999,000.00	15,597,200.00	5,530,600.00	23,126,800.00

B)Sales Mix For Lux Hotel
	Bed 1	Bed 2	Bed 3
sales mix based on accomodation revenue
(Actual sales/budgeted sales)
Actual sales	4,276,800.00	31,752,000.00	11,340,000.00
budgeted sales	433,620.00	1,073,100.00	383,250.00
	9.86	29.59	29.59

C)The weighted average contribution margin (WACM) per night stay of each room type and total WACM.
	Bed 1	Bed 2	Bed 3	Total
Contribution Margin(accomodation rev less cost of goods sold)	$        2,865,456.00	$        21,273,840.00	$        7,597,800.00	$        31,737,096.00
Selling price per night stay(avg sp*365*occupancy rate)	$              48,180.00	$                 89,425.00	$            127,750.00	$              265,355.00
Contribution margin per night stay	$                      59.47	$                       237.90	$                      59.47	$                       119.60

D)the overall break-even level of rooms and number of night stay of each room type.
	Total
contribution	$      31,737,096.00
sales	$      47,368,800.00
Profit volume ratio
(contribution/sales)*100	67%
overall break even point or break even sales	$      12,851,188.06
(total operating cost/p/v ratio)
	Days
Total No of night stay to earn the break even sales	37250
For Bed 1	12417
For Bed 2	14486
For Bed 3	10347
to be shared in proportion of rooms occupied annually

E) margin of safety=actual sales less break even sales

= 47368800 - 12851188.06 = $ 34517611.94

F)( (8610296+500000)/31737096)*100= 29%

(total operating cost + desired profit)/total contribution margin