Caesars Palace® Las Vegas will use budgets to make its financial plans. Let's assume that Caesars prepares budgets for each of its hotel towers, including the new Julius Tower. Here is a list of budgeting assumptions10 for the Julius Tower for 2016:
Data table for Julius Tower budget assumptions
Number of hotel rooms in the Julius Tower............................................587
Average occupancy rate for Caesars Entertainment Corporation................91.2%
Average hotel room rate per night.....................................................$ 149
Total budgeted fixed costs for the Julius Tower.............................$ 2,390,000
Variable cost per Julius Tower room night............................................$ 27
Requirements
1. How many Julius Tower hotel room nights should be budgeted to be booked in 2016? (Remember that 2016 is a leap year and, therefore, has an extra calendar day or 366 days.)
2. What would be the budgeted net revenue from the Julius Tower hotel rooms in 2016?
3. What would be the budgeted variable costs for the Julius Tower hotel in 2016?
4. Prepare a budget for 2016 for the Julius Tower using the assumptions provided above and the numbers you have calculated. Does it appear that the Julius Tower will be generating a healthy amount of income for Caesars Palace® Las Vegas? Explain.