Question
It is January 2019 and you are reviewing the 2018 income statement for your property. Next week, you and six other general managers will meet
It is January 2019 and you are reviewing the 2018 income statement for your property. Next week, you and six other general managers will meet in El Paso, Texas with the regional manager for an annual performance review meeting. You gather the data provided below and use variance analysis to understand your results prior to the meeting.
Data from an industry consultant show that the market size in 2018 was 73,363 rooms, and you used this information in calculating your 2018 sales forecast (in Exercises 2 and 3). Today, in January 2019, market data revealed that 60,575 rooms were sold in your area by you and your competitors. Calculate actual (1) market share and (2) average room rate so that you may use these numbers to create flex budgets that enable you to report (1) market size and (2) market share variances.
Variances are computed relative to the budget. Use the budget you prepared in the Sunrise Hotels (D) case.
The following table was obtained from your year-end income statement:
Rooms Rented 15,713
Revenues $ 593,058
Controllable Costs
Front Office 112,191
Housekeeping 56,165
Other Personnel 79,594
Total Personnel 247,950
Supplies 20,601
Other Expense 28,792
Repairs 37,218
Energy 60,795
Utilities 29,394
Total Expense $ 424,750
Controllable Profit $ 168,308
Required
1.What are the Level-0, Level-1, and Level-2 variances for your property? What are the market size, market share, and sales price variances? Hint: Prepare multiple flexible budgets, gradually relaxing assumptions from the static budget to the actual results (the "Turn-one-dial-at-a-time" approach).
2. What are the price and efficiency variances (i.e., Level-3 variances) for housekeeping expenses? To do this, you obtained the following data from the company controller: Housekeepersworked a total of 7,247.1 hours. The standard (budgeted) wage rate was provided in the budgeting case, Sunrise Hotels (D)
Step by Step Solution
3.37 Rating (150 Votes )
There are 3 Steps involved in it
Step: 1
ANSWER 1What are the Level0 Level1 and Level2 variances for your property What are the market size market share and sales price variances Hint Prepare ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started