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Hospitality Management Accounting 8th Edition Michael M. Coltman, Martin G. Jagels - Solutions
P9.7 A 120-seat family restaurant is open Mondays to Saturdays only for lunch and dinner. On Sundays and holidays, totaling 60 days annually, the restaurant is open for dinner only. During the coming year, the owner anticipates the following:Prepare the restaurant’s budgeted income statement for
P9.6 A resort hotel has a dining room that has no business from street trade;it is dependent solely on the occupancy of its rooms for its sales revenue. It has 150 rooms. During the month of June it expects 80 percent occupancy of those rooms. Because the resort caters to the family trade, there
P9.5 The manager of Buff’s Buffet is preparing next year’s budget. She wants to prepare a flexible budget for three different annual revenue levels using a contribution margin income statement. Three levels of sales revenue are to be used: $800,000, $900,000, $1,000,000. The following
P9.4 A hotel coffee shop has 130 seats and is open seven days a week for all three-meal periods. During the month of January, it anticipates the following seat turnovers and average food checks:Turnover Average Check Breakfast 1.50 $ 4.00 Lunch 1.75 $ 7.50 Dinner 1.25 $12.50 Calculate the budgeted
P9.3 A dining room has 75 seats. It is open only for lunch and dinner six days a week (closed Sundays). This particular August has four Sundays. Round your calculations to the nearest dollar. Management has forecast the following:Beverage revenue normally averages 15 percent of lunch food sales
P9.2 As the manager of the 80-room motel, you have the responsibility of preparing next year’s budget from the following information:Annual occupancy: 70 percent Average room rate: $88 Variable costs per room occupied: $8 Annual fixed costs: $880,000 Prepare the Motorway Motel’s budget for next
P9.1 A motel has 30 units. During the month of June, its average room rate is expected to be $90, and its room occupancy 75 percent. In July the owner is planning to raise room rates by 10 percent, and occupancy is expected to be 80 percent. In August no further room rate raises are contemplated,
E9.10 A restaurant has budgeted sales revenue of $880,000 for the next year.Variable costs are 70 percent of sales revenue and fixed cost is $244,000.Answer the following questions:a. What are the total variable costs in dollars?b. What is the restaurant’s gross margin expected to be?c. What is
E9.9 A 70-room motel’s average room rate is $150. Its average occupancy is 72 percent. Fixed costs are $1,360,000 a year and variable costs are$222,222 a year. Calculate the motel’s operating income for the year.
E9.8 Calculate the room revenue for a 60-room motel for the first three months of the year. Assume February is not in a leap year and has 28 days. The following information is given:Room Rate Occupancy January $ 84 60%February $ 96 70%March $108 78%
E9.7 An 80-seat coffee shop is open for all three meals every day of the year.Calculate sales revenue for the coming year. Seat turnover and average check figures are as follows:
E9.6 You manage a small motel, which has 40 rooms, with an average room rate of $64 on a 70 percent occupancy rate. Fixed costs are $480,000 and the VC per room sold is $6. What do you anticipate your annual operating income (before tax) to be in the coming year?
E9.5 Assume you had a guest count for the first three months of the year: in January the count was 1,480, in February the count was 1,880, and in March the count was 2,400. What was the moving average guest count for the first quarter of the year?
E9.4 Using the same information in Exercise 9.3, answer the following about the sales revenue:a. What is the budget variance? Is it favorable or unfavorable?b. What is the price variance? Is it favorable or unfavorable?c. What is the sales volume variance? Is it favorable or unfavorable?
E9.3 A motel had budgeted an occupancy of 6,000 rooms with a selling price of $80 per room and a variable housekeeping cost of $3.70 per room.Actual data indicated that a total of 6,240 rooms were sold at an average selling price of $76 per room and the actual cost of housekeeping per room was
E9.2 A motel operation has 70 rooms, an occupancy rate of 80 percent, and an average room rate of $68.00. The owner wants you to give an estimate of sales revenue for the month of April. What is the estimated sales revenue?
E9.1 A restaurant has 100 seats with an average turnover of 2.25, with an average check of $12.00. The restaurant is open 312 days a year. What is the estimated sales revenue for the year?
21. Explain the difference between a sales volume variance and a quantity variance.
20. Using an example, explain what a favorable sales volume variance is.
19. Using an example, explain what an unfavorable cost variance is.
18. Briefly explain how the use of a moving average works as a forecasting method.
17. Give two advantages and two disadvantages of ZBB.
16. Briefly describe the ranking process under ZBB.
15. Give an example of a decision unit in a hotel’s accounting office and write a one-sentence objective for that decision unit.
14. List three types of cost that are controllable with ZBB.
13. What is a pro forma income statement?
12. List the four items that must be multiplied by each other to forecast total annual food revenue for the dinner period of a restaurant.
11. What is derived demand?
10. In projecting sales revenue for breakfast in the coffee shop of a hotel, what factors need to be considered?
9. A cocktail lounge had sales revenue in May of $40,000. Budgeted revenue was $42,000. List three possible questions that could be asked, the answers to which might explain the $2,000 difference.
8. Discuss three possible limiting factors to consider in preparing a budget for a hotel or restaurant.
7. Two of the steps in the budgeting cycle are:a. Establishing attainable goalsb. Planning to achieve these goals What are the other three steps?
6. Explain the difference between a fixed and a flexible budget.
5. Give an example of:a. A hotel departmental budgetb. A capital budget for a restaurant
4. Explain the difference between long- and short-term budgeting.
3. List and discuss three advantages of budgeting.
2. What are some of the purposes of budgeting?
1. Explain the concept of budgeting?
13 Use mathematical techniques, such as moving averages and regression analysis, in forecasting.
12 Use variance analysis to compare budgeted figures with actual results.
11 Briefly discuss the pros and cons of ZBB.
10 Discuss ZBB with reference to decision units and the ranking process.
9 Prepare budgeted (pro forma) income statements, given appropriate information about estimated revenue and costs.
8 Explain what information is required to determine budgeted revenue in a restaurant operation and budgeted revenue in the rooms department of a hotel or motel.
7 Define the term derived demand.
6 Briefly explain some of the limiting factors to keep in mind when budgeting.
5 List and briefly discuss each of the five steps in the budget cycle.
4 Briefly discuss some of the advantages and disadvantages of budgeting.
3 Describe some of the types of budgets, such as departmental, capital, fixed, and flexible.
2 Define the three purposes of budgeting.
1 Explain the concept of budgeting.
P8.12 A resort hotel has total annual sales revenue of $1,000,000, variable costs of $350,000, and fixed costs of $570,000. The fixed costs include $80,000 a year for land rental lease.a. Calculate the hotel’s breakeven point.b. If the owners had an equity investment in the hotel of $1,200,000,
P8.11 An owner has $200,000 to invest in a new restaurant. Equipment and furniture are to be purchased for $160,000, and $40,000 will be used for initial working capital. First-year estimates anticipate variable costs as a percentage of sales revenue and food costs at 35 percent, variable wage
P8.10 A neighborhood restaurant opens for lunch only and has a menu limited to five meals. The history of each menu item relative to its percentage of total sales, selling price (SP), and variable costs (VC) are shown in the following:Total variable cost of beverages averages 55 percent. The
P8.9 A motel has a rooms department and a dining room, and fixed cost is$335,000. Annual sales revenue and cost figures are as follows:a. What will be the increase in contribution margin if there is a $20,000 increase in sales revenue only in the rooms department?b. What will be the increase in
P8.8 A restaurant has a café and bar operation. The café provides 65 percent of total revenue with a 48 percent variable cost. The bar provides 35 percent of total revenue with a 38 percent variable cost. Answer the following:a. What is the contribution margin of the café?b. What is the
P8.7 The Relax Inn’s rooms department has annual sales of $600,000 and variable costs of $180,000. The inn’s food department has annual sales revenue of $200,000 and variable costs of $160,000. The inn’s fixed costs are $220,000. The total sales revenue of the inn is $800,000 jointly.a.
P8.6 A 90-room motel has an average room rate of $65.60. Its fixed costs are$300,000 a year, and its variable costs total $476,000 at an average occupancy of 70 percent.a. What is the motel’s breakeven occupancy percentage?b. What level of sales revenue is required to provide an operating income
P8.5 A motel has 70 rooms it usually rents out, in the following proportions:45% singles at: $48.00 per night 35% doubles at: $60.00 per night 20% triples at: $72.00 per night The motel has annual fixed costs of $345,000 and variable costs averages $15.00 per room occupied.a. Calculate the
P8.4 A cocktail bar is presently doing $500,000 a year in sales. Liquor cost is 40 percent and other variable costs at this level of sales revenue total$140,000. Fixed costs are $120,000.a. What is the present annual operating income (before tax)?b. The owner wants to increase the manager’s
P8.3 A restaurant is being planned that will require an investment of $150,000 in equipment by the owner. The following shows forecasted variable cost percentages, identifiable fixed, and semifixed costs.a. What is the breakeven level of sales revenue for the restaurant? Prepare a contribution
P8.2 A small inn has annual fixed costs of $86,000, variable costs of 70 percent of sales revenue, and a tax rate of 25 percent. The owner wants an after-tax net income of $30,000. What sales revenue must be achieved to provide $30,000 net income after tax? Prepare a contribution margin income
P8.1 A restaurant with an average check of $10 per guest has the following average monthly figures:Sales revenue $500,000 Variable costs 260,000 Fixed costs 160,000a. What is breakeven sales revenue?b. If actual sales revenue was $440,000, what would the restaurant’s operating income be?c. If
E8.10 Assume the following information is provided:Explain how each numerator item in the CVP equation is an individual item that can be calculated on its own to find the necessary sales revenue to cover that item. Calculate each element in the numerator individually item by item and total the
E8.9 An operation operates with a variable cost percentage of 74 percent. The owner wants to increase sales by an amount necessary to provide for an additional operating income of $500 a month, or $6,000 a year. What is the additional increase in sales revenue required?
E8.8 A hospitality operation has sales revenue of $444,000 with variable cost averaging 42 percent. Fixed costs are $188,482. The owner wants a net income after tax of $48,000 based on a tax rate of 28 percent.a. Calculate the total additional sales revenue needed to support the desired net income
E8.7 The owner of a restaurant and bar operation wants a 20 percent net income after-tax return on his investment of $180,000. The tax rate is 28 percent. What is the net income before tax and the income tax?
E8.6 A restaurant has an average check of $12.95, with an average variable cost of $5.44. Fixed costs are $140,000. Calculate the following:a. What is the unit contribution margin?b. What are breakeven units?c. What is the variable cost percentage?d. What is the contribution as a percentage?e. What
E8.5 A small pub serving specialty beer only has fixed costs of $50,400 per year. The average contribution margin on sales is $2.24. What is the number of units to be sold to reach breakeven?
E8.4 A restaurant has fixed costs of $40,000 for the month of March 0002.The average check is $12.50 with an average variable cost of $7.50. What is breakeven units of sales for the month of March?
E8.3 Fixed costs are $240,000 and the contribution margin is 48 percent. What is breakeven sales revenue?
E8.2 Fixed costs are $145,000 and variable costs are 38 percent. What is breakeven sales revenue?
E8.1 A restaurant has sales revenue of $240,000, fixed costs of $100,800, and variable costs of $96,000. What is breakeven sales revenue?
12. State the equation for converting an after-tax profit figure to a before-tax profit amount.
11. A restaurant has a food department and a beverage department. Total revenue is made up of 80 percent food and 20 percent beverages. Food variable costs are 35 percent, beverage variable costs are 33 percent. What is the restaurant’s combined contribution margin?
10. In studying the feasibility of a new operation, how can CVP analysis be used to determine the volume of sales required to give a desired return on investment?
9. If management wants to know the sales level it would have to achieve to make a specific profit, how can the required sales level be calculated?
8. Define the term contribution margin.
7. What is the equation for calculating required sales in units using CVP analysis?
6. What is the equation for calculating a particular revenue level in dollars using CVP analysis?
5. In an ongoing business, why is a graph not necessarily the best technique to use in CVP analysis?
4. If one has used a breakeven graph to determine the breakeven level of revenue, how can one arithmetically test that the level selected is correct?
3. Give a brief explanation of how to prepare a breakeven graph or chart to be used in CVP analysis.
2. Discuss two of the limitations built into CVP analysis.
1. Discuss two of the assumptions built into CVP analysis.
8 Discuss the use of CVP analysis to solve problems concerning joint fixed costs in a multiple-department organization.
7 Discuss how operating income before tax and net income (after tax) can be used in the CVP equation.
6 Explain the term contribution margin and the format of a contribution margin income statement.
5 Demonstrate by example how the CVP equations are used to determine sales volume in dollars and sales quantity in units.
4 Demonstrate by example how the CVP equations are used to determine breakeven sales in dollars and in units.
3 State the CVP equation used to determine the sales level in dollars and the equation used to determine the sales level in units.
2 Identify and discuss the various functions shown in a graph of sales levels, and fixed and variable costs.
1 Briefly discuss the assumptions and limitations inherent in CVP analysis.
P7.11 A restaurant has the following 12-month record of revenue and wages:Sales Revenue Wage Costs January $24,900 $11,300 February 24,200 11,100 March 25,600 11,200 April 24,200 11,400 May 34,000 13,200 June 46,200 18,600 July 53,300 21,600 August 44,000 16,100 September 34,200 15,100 October
P7.10 Complete a regression analysis to determine total annual fixed and variable costs using the sales revenue and wage costs shown in Problem 7.9. Compare regression analysis results with the results obtained in Problem 7.9, and comment about the results between the two different methods used to
P7.9 You have the following information from the records of a restaurant:Use the high–low method to calculate total fixed cost and total variable cost for the year.
P7.8 A hotel wishes to analyze its electricity cost in its rooms department in terms of fixed and variable elements. Monthly income statements show that during its busiest and slowest months, cost and rooms occupied information is as follows:Rooms Cost Rooms Sold Busiest $2,600 2,400 Slowest 2,000
P7.7 Stella’s Steak House has been operating for the past 10 years, and Stella has to negotiate her lease on the premises for the next 5 years. Her options are to pay a fixed monthly rent of $2,500 or to pay a variable monthly rent of 6 percent of her sales. Over the next five years she
P7.6 An entrepreneur is contemplating purchasing one of two similar competitive motels and has asked for your advice. Present revenue of each motel is $450,000 per year. Jack’s motel has annual variable costs of 50 percent of sales revenue and fixed costs of $200,000; Jock’s motel has annual
P7.5 A company owns three motels in a ski resort area. Although there is some business during the summer months, the company finds it very difficult to staff the three operations during this period and is contemplating closing one of the three motels. The sales revenue and breakdown of costs during
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