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Question 9 (a) 100-room budget hotel usually rents out its rooms in the following proportions:...

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Accounting

Question 9

(a) 100-room budget hotel usually rents out its rooms in the following proportions:

50% singles @ $80

25% doubles @ $90

25% triples @ $100

Variable costs averaged $30 per occupied room. Annual fixed costs are $1,000,000.

(i) Calculate the hotel's average room rate (that is, the blended rate from singles, doubles and triples) based on 60 rooms sold.

(ii) Calculate the hotel's breakeven occupancy percentage.

(iii) Calculate the occupancy percentage that will give an operating income (before tax) of $200,000 per year.

(iv) Calculate the occupancy percentage that will give an operating income (before tax) of $180,000 per year if the average room rate decreased by 10% and variable costs increased by 10%.

(b) The budget hotel has the following breakdown of its room revenue and wages in the rooms department:

Room Revenue ($) Wage Costs ($)
January 48,900 22,700
February 48,300 22,300
March 51,300 22,500
April 48,500 22,900
May 68,100 26,500
June 92,500 37,300
July 106,700 38,400
August 88,100 32,300
September 68,500 30,300
October 60,900 25,700
November 56,500 22,500
December 54,100 26,100

Calculate the variable cost as a percentage per dollar of room revenue using the High-Low method.

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