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Do the operations budget for 2020 based on given information

Number of rooms 240 2019 2020 Budget ADR 320 OCC 80% RevPAR 256 REVENUE Rooms S 22,425,600 Food & Beverage 6,240,000 Other Operated Departments 480,500 Miscellaneous Income 40,000 TOTAL REVENUE $ 29,186,100 DEPARTMENTAL EXPENSES Rooms $ 5,157,888 Food & Beverage 3,868,800 Other Operated Departments 120,125 TOTAL DEPARTMENTAL EXPENSES 9,146,813 TOTAL DEPARTMENTAL PROFITS 5 20,039,287 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 4,669,776 Marketing 2,918,610 Utility Costs 291,861 Property Operation & Maintenance 350,233 TOTAL UNDISTRIBUTED OPERATING EXPENSES 8,230,480 GROSS OPERATING PROFIT 5 11,808,807 Franchise Fees 897,024 Management Fees 708,528 INCOME BEFORE FIXED CHARGES 5 10,203,254 SELECTED FIXED CHARGES Property Taxes 420,000 Insurance 62,000 Reserve For Capital Replacement 180,000 EBITDA 9,541,254 Depreciation 236,000 Interest Expense 20,000 Income Before Income Tax 9,285,254 Income Tax 2,321,314 Net Income 6,963,941IstanBlue Hotel is a 240-room property with food and beverage operations. ADR is expected to be $340 and the occupancy rate to be 84% in 2020. F&B department's revenues are expected to increase by 7%. Other Operated Departments revenues are expected to increase by 5%. Miscellaneous Income of $135,000 is expected in 2020. The expected changes to the some of the expenses are as follows: The owners are planning to expand the hotel by adding 20 suites. The plan will increase the rooms revenues by $6,400,000 and increase the F&B revenues by 5-percents in 2021. The suites will increase the fixed part of Marketing expenses by $80,000, interest expense by $60,000, and the depreciation expense by $50,000 in 2020. A new position for assistant GM is projected to be open and filled by February 1, 2020. The posted salary for the position is $61,200. Cost Behavior: > Room, Food & Beverage, and other operated departments expenses are directly variable with respective sales revenues. Administrative and general: 3,000,000 is fixed (same as 2019 but consider the new salary), the remainder is variable with total revenue. Marketing: $900,000 is fixed, the remainder is variable with total revenue. Utilities cost: $127,000 fixed, the remainder is variable with total revenue. Property Operations & Maintenance: $150,000 is fixed, the remainder is variable with total revenue. Franchise fees: 5% of the Room's Revenue. Management fees: 6% of the GOP. The property taxes and insurance expenses are same as 2019. Capital Reserve: 1.8% of the GOP. Depreciation and interest expense are fixed (same as 2019 plus the new depreciation and interest expenses as noted above). The income tax rate is 25%. Based on given information above and the previous year's income statements, prepare the operation budget for the year 2020.Number of rooms 100 Cash Budget December January February March April Cash Budgeting ADR 205 S 210 $ 215 $ 224 $ 230 January February Ma OCC 82% 82% 83% 84% 85% Everglades Hotel's cash receipts and sales structure are as follows: Cash-Beginning of Month RevPAR 168 S 172 5 178 $ 188 $ 196 Estimated Cash Receipts 1-Cash sales represent 75% of each month's sales. Cash Sales REVENUE 2-Credit sales represent the remaining 25% of each month's sales, Credit sales made in the Collection of A/R Rooms $ 6,135,650 $ 6,285,300 $ 6,513,425 $ 6,867,840 $ 7,135,750 current month are collected in the following month. Misc Income Food & Beverage $ 2,472,860 $ 2,720,146 $ 2,992,161 $ 3,291,377 $ 3,620,514 Proceeds from Sale of Land Other Operated Departments 342,050 $ 359,153 $ 377,110 $ 395,966 $ 415,764 3-The hotel receives cash each month for the projected misc. income. Tota Miscellaneous Income 102,000 $ 104,040 5 106,121 $ 108,243 $ 110,408 Estimated Available Cash TOTAL REVENUE $ 9,052,560 $ 9,468,639 $ 9,988,817 $ 10,663,426 $ 11,282,436 4-The hotel expects to recevic $450,000 in March from sale of land. Estimated Cash Disbursements Payment of Cost of Sales DEPARTMENTAL EXPENSES The hotel's cash disbursements and expenses have the following structure: Admin & General payments Rooms 920,348 $ 1,558,805 $ 1,633,722 $ 1,681,945 $ 1,710,801 Marketing payments $ 1,236,430 $ 1,897,800 $ 1,898,500 $ 1,978,400 $ 1,968,600 1-Purchases are paid as follows: 45% of cost of sales of previous month; $5% of cost of Food & Beverage Utility Cost payments Other Operated Departments $ 102,615 $ 122,763 $ 144,802 $ 126,334 $ sales of current month. 119,258 2- 50% of Admin and General expenses are paid in the month they are expensed; 50% are Property Operation & Maintenance payments TOTAL DEPARTMENTAL EXPENSES $ 2,259,393 $ 3,579,368 $ 3,677,024 $ 3,786,679 $ 3,798,659 paid in the next month. Franchise Fees Payments 3-Marketing expenses are paid as follows: 40% of the marketing expense are paid in the Management Fees Payments TOTAL DEPARTMENTAL PROFITS $ 6,793,168 $ 5,889,271 $ 6,311,793 $ 6,876,747 $ 7,483,777 month expensed. 60% paid in the next month. Property Taxes 4- 70% of Utility Costs and Property Op and Maint expenses are paid in the month Insurance UNDISTRIBUTED OPERATING EXPENSES expensed. The remaining 30% are paid in the following month. Reserve for Capital Replacement Administrative & General $ 1,305,256 $ 1,346,864 $ 1,398,882 $ 1,466,343 $ 1,528,244 5-Franchise and management fees are paid in the month expensed. Income Tax Payments Marketing S 702,628 $ 723,432 $ 749,441 $ 783,171 $ 814,122 6-Property Taxes are paid in November. 7-Insurance expenses and Reserve for Capital Replacement are paid in October. Purchase of Equipment Utility Costs 431,577 $ 444,059 $ 459,664 $ 479,903 $ 498,473 B-Interest expense is included in the long term dept payments of $500,000 and are paid in Purchase of Building Property Operation & Maintenance S 446,577 $ 459,059 $ 474,664 $ 494,903 $ 513,473 December. Purchase of New Hotel TOTAL UNDISTRIBUTED OPERATING EXPENSES $ 2,886,038 $ 2,973,414 $ 3,082,651 $ 3,224,319 $ 3,354,312 9-Income taxes are paid quarterly. The tax expense for January-March period is paid in Total Cash Disbursements March. Estimated Cash-Ending GROSS OPERATING PROFIT $ 3,907,130 $ 2,915,856 $ 3,229,141 $ 3,652,427 $ 4,129,466 Other information: Franchise Fees (Royalty) 245,426 $ 251,412 $ 260,537 $ 274,714 $ 285,430 Management Fees 117,214 $ 87,476 5 96,874 S 109,573 $ 123,884 1-Cash at the beginning of January is $280,000. 2-Equipment costing $750,000 is scheduled to be purchased in December and is to be paid in three equal installments in February, March and April. INCOME BEFORE FIXED CHARGES $ 3,544,490 $ 2,576,969 $ 2,871,730 $ 3,268,141 $ 3,720,152 3-A building costing $600,090 is scheduled to be completed in April. Half of the cost was paid in December. The remaining part will be paid in March. SELECTED FIXED CHARGES 4- A new hotel is being acquired in February for $800,000 and will be paid in four equal Property Taxes 246,000 $ 246,000 $ 246,000 $ 246,000 $ 246,000 installments in February, March, April and May Insurance 72,000 $ 72,000 5 72,000 $ 72,000 72,000 Reserve For Capital Replacement 78,143 $ 58,317 $ 64,583 $ 73,049 $ 82,589 Based on the given information and the income statements, prepare the cash budget for EBITDA $ 3,148,347 $ 2,200,652 $ 2,489,147 $ 2,877,092 $ 3,319,562 Depreciation 235,000 $ 235,000 $ 235,000 $ 235,000 235,000 Interest Expense 50,000 $ 50,000 $ 50,000 $ 50,000 50,000 Income Before Income Tax $ 2,863,347 $ 1,915,652 $ 2,204,147 $ 2,592,092 $ 3,034,562 ncome Tax $ 572,669 $ 383,130 $ 440,829 $ 518,418 $ 606,912 Net Income $ 2,290,678 $ 1,532,521 $ 1,763,318 $ 2,073,674 $ 2,427,650

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