The owner of a local motel told you to help him set up his budget with...
The owner of a local motel told you to help him set up his budget with the following information:
Its monthly Fixed Cost amount is $120,000, while its Variable Cost is $15 per room sold.
During the slowest month, he will reduce his ADR to $30 to sell 6,000 rooms. However, the Variable Cost per room will not change. Using the information provided, complete the Pro Forma Income Statements (Operating Budget); and provide your answer to the question below.
Slowest month
(6,000 rooms to sell @ lowered ADR of $30)
Vertical Analysis (%)
Revenues: $180,000 XXXXXX
Variable Cost ($15 per room): __(25)___ __(30)___
Contribution Margin: __(26)___ __(31)___
Fixed Cost: $120,000 __(32)___
EBT: __(27)___ XXXXXX
Tax (40%) __(28)___ XXXXXX
Net Income: __(29)___ __(33)___
1. Provide your answer to the amount of (25)
2. Provide your answer to the amount of (26)
3. Provide your answer to the amount of (27).
4. Provide your answer to the amount of ( 28).
5. Provide your answer to the amount of (29).
Homework Answers
1. Variable cost = 6,000*$15 = $90,000
2. Contribution margin = $180,000-90,000 = $90,000
3. EBT = $90,000-120,000 = -$30,000
4. Tax = -$30,000*40% = -$12,000
5. Net income = -$30,000-$12,000) = -$42,000
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