Jim Culf is the manager of the Royal Hotel, Bigtown-on-Sea. In anticipation of preparing next years budget,
Question:
....................................................................................... £/week
Staff salaries................................................................... 2,000
Head office charge........................................................... 400
Depreciation of equipment and fittings........................ 875
Heating.............................................................................. 425
For each guest the average variable cost of food, drink, linen and sundries totals £100 per week. Jim considers all other overheads to be semi variable and has produced the following data from his records:
The average price charged for a weeks stay is £240 per guest. Since it is a seaside hotel, the vast majority of its customers stay for either one or two weeks at a time.
Tasks:
1 Calculate the average number of guests needed each week to avoid making a loss.
2 The hotel can accommodate a maximum of 120 people. How much is the weekly profit if the average occupancy level is:
a) 70%?
b) 80%?
c) 90%?
3 Jim has been invited by an international tour company to quote a competitive price for a group of 20 Japanese tourists who wish to stay in the area for two weeks. They are due to arrive in 10 days time.
a) Calculate the lowest price Jim can quote if he is to avoid making a loss on the tour. (Assume that the hotel is currently 70% booked for the two weeks in question.)
b) If Jim wants to make a profit of £2,000 from this tour, what price should he quote?
Step by Step Answer:
Managerial Accounting Decision Making and Performance Management
ISBN: 978-0273764489
4th edition
Authors: Ray Proctor