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Hospitality Management Accounting 8th Edition Martin G Jagels, Michael M Coltman - Solutions
A restaurant operator wishes to choose between two alternative roll-in storage units. Machine A will cost $9,000 and have a trade-in value at the end of its five-year life of $1,500. Machine B will cost $8,500 and at the end of its five-year life will have a trade-in value of $700. Assume
Pete’s Pizza is planning to purchase a new type of oven that cooks pizza much faster than the conventional oven now used. The new oven is estimated to cost $20,000 (use straight-line depreciation) and will have a five-year life, after which it will be traded in for $4,000. Pete has calculated
You have to make a decision either to buy or to rent the equipment for your restaurant. Purchase cost would be $30,000. Of this amount,$7,500 would be paid cash now, and the balance would be owed to the equipment supplier. The owner agrees to accept $4,500 a year for five years as payment toward
Pizza Restaurant provides a delivery service and is considering purchasing a new compact vehicle or leasing it. Purchase price would be$13,500 (cash), which the restaurant has. Estimated life is five years.Residual (trade-in) value is $2,500.Under the purchase plan, the additional net cash income
For many years, a motor hotel has been providing its room guests with room service of soft drinks and ice, using the services of a part-time bellhop to deliver to the rooms. Typically, the service has been losing money.The average figures for each of the past few years are as follows:The motor
A motel leases out its 1,000-square-foot coffee shop, although it continues to own the equipment. The lease is due for renewal. The motel could continue to rent the space for $2 a square foot per month for the next three years, and then $2.50 a square foot for the following two years.Alternatively,
Since a feasibility study for a proposed new venture cannot guarantee that the venture will be successful, of what value is such a study?
In a feasibility study for a restaurant in a downtown office building, what general market characteristics do you think would be relevant?
Briefly describe how a composite growth rate of demand for hotel rooms can be calculated.
Two similar competitive restaurants have quite different levels of demand(average total number of customers per day). What factors could cause this to be so?
In preparing the pro forma income statement for a rooms department, how do you think the average room rate and occupancy figures could be established?
In estimating total sales revenue for a coffee shop in a proposed new hotel, why is it important to begin by estimating sales revenue by meal period?
What adjustments generally have to be made to the net income figures to convert them to a cash flow basis?
In what way might a change in the depreciation method used affect the projected cash flow figures in a feasibility study?
If the initial feasibility of a proposed new hotel does not appear good from a financial point of view, what variables might one try to change to improve the result?
There are five competitive motels in a resort area with the following number of rooms and current occupancy rates:Demand for rooms in the area is broken down into the following sources and growth rates:a. Calculate the current average occupancy of the five motels.b. Calculate the composite rate of
Six competitive motor hotels have the following number of rooms and current occupancy rates.Demand for rooms in the area where the motor hotels are located is broken down into the following sources and growth rates:a. Calculate the current average occupancy of the six motor hotels.b. Calculate the
A financial feasibility study is being carried out for a proposed new 120-seat restaurant. It will be open for both lunch and dinner from Monday through Saturday and for dinner only on Sunday. For the sake of simplicity, assume a 52-week year. Seat turnover and average food check figures are
A new 50-room budget motel is being planned. Total cost will be$1,450,000, of which land will be $150,000, building $900,000, furniture and equipment $300,000, and the balance for preopening interest and other expenses. The building will be financed 70 percent by an 8 percent mortgage for 21 years.
Given the facts in Problem 13.4, assume the building will be depreciated at 6 percent double declining balance, and that furniture and equipment will be depreciated at 25 percent double declining balance. Prepare depreciation schedules for the first five years. (Round calculated figures to the
Given the facts in Problems 13.4 and 13.5 and the following additional information, prepare the pro forma income statements for each of the first five years:Rooms operating costs average 60 percent of total room revenue. Indirect expenses will be $40,000 in year 1 and will increase by $4,000 a year
Given the facts in Problems 13.4, 13.5, and 13.6, calculate the net annual cash flow figures for each of the five years. What would be your evaluation of the financial feasibility of this proposed motel?
Explain your understanding of a mission statement and state four purposes that it can serve.
Briefly describe your understanding of the meaning of financial management.
Explain how you think a small restaurant operation can practice good financial management.
What is your understanding of the term satisficing?
Explain why wealth maximization, as indicated by market price of shares, may not be achieved by profit maximization.
Would the objective of no net income for a certain period (e.g., three years)be consistent with the goal of wealth maximization? Explain.
What is a secondary goal? Give an example that might be appropriate for the housekeeping department of a hotel.
Define MBO and explain how it is used in an organization. What is goal congruence, and how does it fit in with MBO?
Discuss the need for an action plan to achieve goals and differentiate between strategies and tactics.
What are the four steps in the decision-making process?
Discuss how you think an information system should be judged for quality.
What are the main criteria for information so it is useful in the decisionmaking process?
Define management by exception and give an example of a circumstance where it might be used.
Briefly discuss two ways in which the effectiveness of a management information system can be determined.
Some hospitality enterprise entrepreneurs, even with limited education, have been successfully operating their businesses for many years. They have probably never heard of management by objectives (MBO). Their only goal is to work hard and make an adequate profit. In your opinion, and given
The following paragraph appeared in a chain motel’s monthly in-house newsletter announcing the creation of a trophy that will be awarded to the motel with the most outstanding performance each year:The trophy will be given to the motel with the best combination of sales percentage increase and
In late January 2006, George Ray, president of Restoration Resort Ltd., is concerned about how he could finance the more than $200,000 he estimates he needs to convert, improve, and expand the company’s resort facilities. The resort has very little cash, and George and his wife have about $20,000
Explain the concept of budgeting?
What are some of the purposes of budgeting?
List and discuss three advantages of budgeting.
Explain the difference between long- and short-term budgeting.
Give an example of:a. A hotel departmental budgetb. A capital budget for a restaurant
Explain the difference between a fixed and a flexible budget.
Two of the steps in the budgeting cycle are:a. Establishing attainable goalsb. Planning to achieve these goals What are the other three steps?
Discuss three possible limiting factors to consider in preparing a budget for a hotel or restaurant.
In projecting sales revenue for breakfast in the coffee shop of a hotel, what factors need to be considered?
List the four items that must be multiplied by each other to forecast total annual food revenue for the dinner period of a restaurant.
List three types of cost that are controllable with ZBB.
Give an example of a decision unit in a hotel’s accounting office and write a one-sentence objective for that decision unit.
Briefly describe the ranking process under ZBB.
Give two advantages and two disadvantages of ZBB.
Briefly explain how the use of a moving average works as a forecasting method.
Using an example, explain what an unfavorable cost variance is.
Using an example, explain what a favorable sales volume variance is.
Explain the difference between a sales volume variance and a quantity variance.
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?
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?
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 $4.20 per
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?
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?
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?
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: Turnover Average Check Breakfast 2.25 Lunch 1.75 Dinner 2.75 $ 7.60 8.00 11.60
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 January $ 84 60% February March $ 96 70% $108 78%
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.
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 the
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, but
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
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 revenue
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:Calculate the budgeted sales revenue for the coffee shop for January. Turnover Average Check Breakfast Lunch
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 information is
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 are on
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:In addition, the restaurant has a small private party room and
A restaurant’s average monthly income statement is as follows:The owner is considering two possible alternatives for the coming year:By improving purchasing and reducing portions, cutting the food cost from 45 percent to 40 percent of food sales revenue. There would be no other changes.Cutting
a. Budgeted liquor sales at a banquet were 1,500 drinks at $3.15 each.Actual sales were 1,550 drinks at $2.85 each. Determine the price and sales volume variances.b. Banquet food sales for a month were estimated to be 20,000 covers at $10.80 each. Actual sales were 21,000 customers at $11.25
An 80-room motel forecasts its average room rate to be $66.00 for next year at 75 percent occupancy. The rooms department has a fixed wage cost of $171,450. Variable wage cost for housekeeping is $7.50 an hour;it takes one-half hour to clean a room. Fringe benefits are 15 percent of total wages.
You have been asked to help prepare the operating budget for a proposed new 100-room motel, with a 65-seat coffee shop, 75-seat dining room, and 90-seat cocktail lounge. The operating budget for the first year will be based on the following information:Rooms Department Occupancy is 60 percent with
You have the following guest-nights and meals-served figures for the past 12 months for the Inland Inn. Guest Nights Meals Served January February 5,509 7,301 5,811 7,522 March 5,896 7,555 April 6,022 7,732 May 5,999 7,827 June 5,886 7,752 July 5,973 7,866 August 6,001 7,798 September 6,114 7,851
The manager of the Hospitality Inn has developed regression analysis equations for forecasting the hotel’s dining room sales volume based on the hotel’s anticipated guest night count. The monthly equations (where y equals the forecast number of meals to be served, and x equals the number of
What is the purpose of the SCF?
What are the major operating accounts by category analyzed in the SCF, indirect method?
If a current asset account increases, how is the increase treated in the statement of cash flows?
What is the typical noncash item, by name, that is automatically added back in the operating activities section of the SCF?
The financing section of an SCF can analyze three different items by category.What are they?
What are the primary items by category analyzed in the SCF, investing section?
Of what use is the statement of source inflows and use outflows of working capital?
List the three major common source inflows and the three major common use outflows of working capital.
Explain why depreciation expense is treated as a source inflow of working capital.
What is a statement of source inflows and use outflows of working capital?
If a business operation has a current ratio of 1.251, what does this mean relative to working capital?
A monthly income statement reported net income of $80,000. Inventory for resale increased by $14,000. Accounts payable increased by$16,000. Using only these three items, determine the net cash flow from operations, indirect method.
Net income is $260,000; Depreciation expense is $42,000; Accounts receivable increased $2,500; Credit card receivables decreased $4,600;Prepaid insurance increased $2,400; Inventory increased by $4,500;Accounts payable decreased $3,000; and Accrued payroll payable increased$3,600. Complete net cash
Identify how each of the following items would be treated in an analysis of changes to working capital. Answer with the word Inflow to show an increase or Outflow to show a decrease in working capital.Net income __________ Sale of equity stock __________ Net loss __________ Purchase of equipment
A hotel provided the following information for year 2006: The cash flow from operating activities was $143,200, average current liabilities were $68,300, average total liabilities were $823,300, and total revenue for the year was $2,406,800. Interest was $68,000. Calculate the following ratios:a.
Given the following information regarding investing and financing activities of an SCF, evaluate each of the given transactions and identify to which section, investing (invest) or financing (finance), the transaction belongs. In addition, identify how the amount is handled. Use Increase for
Assume working capital was $44,000 for a given year. During this year, accounts receivable decreased by $1,400, inventory increased by $8,000, and accounts payable decreased by $2,000. Determine the amount of cash from operations.
Assume the book value of an item of equipment shows $50,000 in year one and $44,000 in year two. Would the $6,000 difference be treated as an inflow source, outflow use, or not shown at all with regard to its effect on working capital?
A review of a balance sheet indicated the beginning and ending totals of current assets and current liabilities for a one-year operating period. Determine the working capital at the beginning and the end of the year. Calculate the change in current assets, current liabilities, and working capital.
Assume a business enterprise reports its total current assets as $24,000 and its total current liabilities as $16,000. Answer the following:a. What is the amount of working capital?b. What is the current ratio (also called the working capital ratio)?c. Will the working capital or its ratio change
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