Question
A motel had the following annual sales and average room rate for the past five years. During this period there were no changes in the
A motel had the following annual sales and average room rate for the past five years. During this period there were no changes in the number or type of rooms and the clientele remained basically the same.
a. Compute Room Rate Index trend numbers using 100 as the base Room Rate Index for Year 1.
b. Using the Room Rate Index developed, convert the reported historic dollar revenue into current dollars.
| Revenue | Room Rate | Room Rate Index | Current $ | |
| Year 1 | $5,000,000 | $250.00 | 100.00% | |
| Year 2 | $5,200,000 | $255.00 | 102.00% | |
| Year 3 | $5,340,000 | $257.00 | 102.80% | |
| Year 4 | $5,500,000 | $260.00 | 104.00% | |
| Year 5 | $5,700,000 | $275.00 | 110.00
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| Room Rate Index Formula: Current Dollar Conversion Formula: Please comment on the sales pattern. Would you consider investing in this establishment? It is important to chose a benchmark when assessing the performance of the operation. What might that benchmark be? |
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The Essentials Of Finance And Accounting For Nonfinancial Managers
Authors: Edward Fields
3rd Edition
0814436943, 9780814436943
