In: Accounting
Problem 13-59 (Static) Prepare Budgeted Financial Statements (LO 13-6, 7)
HomeSuites is a chain of all-suite, extended-stay hotel properties. The chain has 15 properties with an average of 200 rooms in each property. In year 1, the occupancy rate (the number of rooms filled divided by the number of rooms available) was 70 percent, based on a 365-day year. The average room rate was $180 for a night. The basic unit of operation is the “night,” which is one room occupied for one night.
The operating income for year 1 is as follows.
HomeSuites | |||
Operating Income | |||
Year 1 | |||
Sales revenue | |||
Lodging | $ | 137,970,000 | |
Food & beverage | 19,162,500 | ||
Miscellaneous | 7,665,000 | ||
Total revenues | $ | 164,797,500 | |
Costs | |||
Labor | $ | 44,325,000 | |
Food & beverage | 13,797,000 | ||
Miscellaneous | 9,198,000 | ||
Management | 2,500,000 | ||
Utilities, etc. | 37,500,000 | ||
Depreciation | 10,500,000 | ||
Marketing | 25,000,000 | ||
Other costs | 8,000,000 | ||
Total costs | $ | 150,820,000 | |
Operating profit | $ | 13,977,500 | |
In year 1, the average fixed labor cost was $400,000 per property. The remaining labor cost was variable with respect to the number of nights. Food and beverage cost and miscellaneous cost are all variable with respect to the number of nights. Utilities and depreciation are fixed for each property. The remaining costs (management, marketing, and other costs) are fixed for the firm.
At the beginning of year 2, HomeSuites will open three new properties with no change in the average number of rooms per property. The occupancy rate is expected to remain at 70 percent. Management has made the following additional assumptions for year 2.
Required:
Prepare a budgeted income statement for year 2.
NUMBER OF PROPERTIES IN YEAR1=15 | |||||||
Number of rooms in each property | 200 | ||||||
Number of room nights available=200*365 | 73000 | ||||||
Room nights occupied per year per property | 51100 | (73000*70%) | |||||
Annual expected revenue per property | $9,198,000 | (51100*$180) | |||||
BUDGET STATEMENT FOR YEAR2 | |||||||
ACTUAL FOR YEAR1 | BUDGETED FOR YEAR2 | ||||||
A=B/15 | B=A*15 | C | D=C*18 | ||||
Per Property | Total | Per Property | Total | ||||
Sales Revenue: | |||||||
Lodging | $9,198,000 | $137,970,000 | C=1.05*A | $9,657,900 | $173,842,200 | ||
Food and Beverage | $1,277,500 | $19,162,500 | C=0.8*A | $1,022,000 | $18,396,000 | ||
Miscelleneous | $511,000 | $7,665,000 | C=A | $511,000 | $9,198,000 | ||
TOTAL REVENUES | $10,986,500 | $164,797,500 | $11,190,900 | $201,436,200 | |||
Costs: | |||||||
Total Labor Costs | $2,955,000 | $44,325,000 | C=A | $2,955,000 | $53,190,000 | ||
Food and Beverage | $919,800 | $13,797,000 | C=A | $919,800 | $16,556,400 | ||
Miscelleneous Costs | $613,200 | $9,198,000 | C=1.25*A | $766,500 | $13,797,000 | ||
Management | $166,667 | $2,500,000 | C=1.08*A | $180,000 | $3,240,000 | ||
Utilities | $2,500,000 | $37,500,000 | C=A | $2,500,000 | $45,000,000 | ||
Depreciation | $700,000 | $10,500,000 | C=A | $700,000 | $12,600,000 | ||
Marketing | $1,666,667 | $25,000,000 | C=1.1*A | $1,833,333 | $33,000,000 | ||
Other Costs | $533,333 | $8,000,000 | C=A | $533,333 | $9,600,000 | ||
TOTAL COSTS | $10,054,667 | $150,820,000 | $10,387,967 | $186,983,400 | |||
OPERATING PROFIT | $931,833 | $13,977,500 | $802,933 | $14,452,800 | |||