Big Tex is a true Texan. When he opened his hotel on the plains of West Texas,
Question:
Big Tex is a true Texan. When he opened his hotel on the plains of West Texas, he named it the Screaming Saloon Inn. He now provides you with the following information about his property.
The inn has 200 rooms, and averages 95% rooms available for sale throughout the year.
Average Daily Rate (ADR) = $60 Variable Costs = 40% of sales Fixed Costs = $604,800 per year Desired Profit = $650,000 per year (after taxes)
Tax Rate = 36%
(Spreadsheet hint: Use the ROUNDUP function in the cells indicated throughout the problem to round up rooms.)
. Big Tex has asked you to help him calculate the following.
(Spreadsheet hint: Do not calculate SP Percentage. You must type in 100 for SP Percentage in order for the grid to calculate properly.)
Per Unit (Room) Percentage | CM Total fixed costs Desired after-tax profit Tax rate Before-tax profit i Rooms available for sale per year
b. Calculate the rooms sold, occupancy %, and sales dollars he will need to break even.
Breakeven point in rooms sold Breakeven point in sales dollars Projected Sales pease Breakeven Sales Margin of Safety Big Tex wants his new manager (the same one mentioned in part
d. above) to oversee a proposed hotel gift shop. The small gift shop will increase his ADR by 1%, his variable costs by 5%, and his fixed costs by $24,000.
g. Calculate the following to reflect the addition of the gift shop.
(Spreadsheet hint: Do not calculate SP Percentage. You must type in 100 for SP Percentage in order for the grid to calculate properly.)
Per Unit (Room)
Total fixed costs h. Calculate the rooms sold, occupancy %, and sales dollars he will need to break even if he opens the gift shop.
Breakeven point in rooms Rounded up = sold Occupancy %
Breakeven point in sales dollars i. Calculate the rooms sold, occupancy %, and sales dollars he will need to achieve his desired profit if he opens the gift shop.
Rooms sold to achieve Rounded up = oa desired after-tax profit Occupancy %
Sales dollars to achieve desired after-tax profit j. If Big Tex has an average occupancy of 70%, will he be able to hire his new manager and still achieve his desired profit? Why or why not? Base your answer on occupancy %.
k. If Big Tex has an average occupancy of 70%, will he be able to hire his new manager, open his proposed gift shop, and still achieve his desired profit? Why or why not?
Base your answer on occupancy %.
Step by Step Answer:
Managerial Accounting For The Hospitality Industry
ISBN: 9780471723370
1st Edition
Authors: Lea R Dopson, David K Hayes