34. The Selena's Hotel, opens 365 days, consists of an 80 rooms hotel and a 60 seats coffee shop. Tamika, the Managing Director, provides you with the following information:

i. Of the 80 rooms 60 are doubles and 20 are singles

ii. The doubles are sold for $180 each and the singles are sold for $90

iii. Forecast occupancy is 84% for doubles and 78% for singles

iv. The average occupancy per room is 1.8 (only one person stays in a single room and two persons stay in a double room).

v. 40% of those guests staying in the double rooms and 20% of the guest staying in the single rooms have breakfast in the coffee shop. The average check is $5.80. (There is no walk-in business for the coffee shop).

vi. The lunch and dinner have seat turnover and average checks as shown below: Days Lunch Dinner Turnover Av. Ck. Turnover Av. Ck. Mon - Fri 1.25 $5.20 1.0 $10.20 Sat 0.5 7.50 1.0 12.50 Sun 1.5 8.00 .5 15.00

vii. The first day of the year for which you are to prepare the budget is a Monday

viii. The food cost percentage is estimated to be 35%

ix. The labour cost percentages are as follows:

Rooms: 20%

Food: 32%

x. Other direct operated expenses include:

Rooms: 10%

Food: 12%

xi. Undistributed operating expenses are as follows:

$100, 000 of fixed expenses and the remainder is 10% of the total revenue

xii. Other fixed costs include the followings:

Property taxes $30,000

Depreciation $60,000

Interest $50,000

xiii. Selena's Hotel pays tax at a rate for 30% per year.

You are required to prepare the:

a. Prepare the operating budget for the year, (your answer should be tabulated). [15]

b. As a student of management accounting you were asked to prepare the report for management based on the figures in the budget and explain to management how, giving examples, they can improve on the business' profitability.

36. Gray's Crib, a 100 seat fine-dining restaurant, expects to start operations in December of 2020. Gray, the owner, heard you talking about the bottom-up approach to pricing, and approached you for your assistance. She has provided you with the following information. Her required return on investment (ROI) is 45%.

Items

Amount

Investment

$450,000

Capital Borrowed

$100,000

Interest rate

12%

Income tax rate

30%

Fixed Cost (Excluding interest)

$175,000

Labour Cost (% of food sales)

20%

Food Costs (% of sales)

40%

Labour Cost (fixed)

$120,000

Controllable Fixed Costs

$115,000

Seat Turnover (times per day)

10

Days Open during the year

360

You are required to:

(a) Calculate the required average price per meal using the bottom approach to pricing for Gray's Crib. [8]

(b) Assume the restaurant required revenue is divided among breakfast, lunch and dinner, 25%, 30%, and 45% respectively. Further, assume that seat turn for breakfast, lunch and dinner are 2, 2.5 and 3 respectively. Calculate the average price for breakfast lunch and dinner. [6]

(c) Explain two (2) other pricing methods, giving advantages and disadvantages of each.