Question

1. A 345-room hotel’s food and beverage department recorded food revenue of $3,460,397.5 and beverage revenue of $1,483,027.5. The cost of sales was 27.3% of F & B revenue, and the departmental expenses were 43.2% of F & B revenue. What is the gross profit percentage for the hotel’s F&B department?

2.

	Year 1	Year 2
Gross Room Rate (GRR)	$245.00
Direct Costs (35% of GRR)	$85.75
Net Room Rate (NRR)	$159.25
Expenses-(Fixed) (FE)	$60.00
Net Profit (NP)	$99.25
Profit Margin (PM)	40.51%

Determine the Profit Margin if the Gross Room Rate increases by 15% in year 2.

In dollar and percentage terms, how much did Net Profit increase in year 2?

In absolute and relative terms, how much did profit margin increase in year 2?

What would the Gross Room Rate need to be if a Profit Margin of 50% is required?

Answer 1

gross profit percentage for the hotel’s F&B department

	Particulars	Amount ($)	Percentage
A	food and beverage department recorded food revenue	$ 3,460,397.50	100.00%
B	Cost of sales @ 27.3 of F&B Revenue	$     944,688.52	27.30%
C	Deparmental Expenses @ 43.2% of F&B Revenue	$ 1,494,891.72	43.20%
D = A-(B+C)	Gross Profit	$ 1,020,817.26	30%

Profit Margin if the Gross Room Rate increases by 15% in year 2

	Particulars	Year 1	Year 2
A	Gross Room Rate (GRR)	$245.00	$281.75
B	Direct Costs (35% of GRR)	$85.75	$98.61
C=A-B	Net Room Rate (NRR)	$159.25	$183.14
D	Expenses-(Fixed) (FE)	$60.00	$60.00
E=C-D	Net Profit (NP)	$99.25	$123.14
F=(E/A)*100	Profit Margin (PM)	40.51%	43.70%

Gross Room Rate need to be if a Profit Margin of 50% is required

Desired Profit =

Sales = (Total Fixed Expenses + Desired Profit) / Contribution Margin per unit

100% = ($60 + 50%) / 65%

65%-50% = $60

Sales = $60/15%

Sales = $400