ACC6107: Managerial Accounting

Assignment #2

Due: November 8, 2016 (please submit a hard copy in class)

This assignment is worth 5% of your grade in ACC6107.

Please work on this assignment independently and remember to show your work!

/70 pts

1. (20 pts) You have the following projections about the costs in a family restaurant for next year:

Net income required: 29% net income after tax on the owner?s present investment of

$340,000, income tax rate is 36%.

Depreciation: Present book value (consolidated) of furniture and equipment is

$86,000, depreciation rate is 20%

Interest: Interest on loan outstanding of $30,000 is 9%

Known Costs Variable Costs

Insurance $3,000 Food cost, 41% of sales revenue

License $1,500 Wage cost, 32% of sales revenue

Utilities $9,300 Other costs, 11% of sales revenue

Maintenance $4,200

Administration $7,200

Salaries $43,200

a. What sales revenue would the restaurant have to achieve next year in order to acquire the

desired net income after tax?

b. What is the required average check needed to achieve the annual sales revenue objective if

the restaurant is open 360 days, had 80 seats, and have an average seat turnover of 2.4

times per day?

2. (20 pts) A 70- room motel expects its occupancy next year to be 80%. The owners? investment

is $802,400. They want an after tax return on their investment of 12%. Tax rate is 25%.

? Interest on a long-term mortgage is 7%. Present balance outstanding $1,806,400

? Depreciation rate on the building is 10% of the present book value $900,200.

Depreciation on the furnishings and equipment is at 20% of the consolidated present

book value of $355,400

? Other known fixed costs total $241,800 a year

? At 80% occupancy rate, the motel?s operating expenses, wages, supplies, laundry, etc.

are calculated to be $95,400 a year.

? The motel has other income from vending machines of $5,200 a year.

a. To cover all costs and produce the required net income after tax, what should the motel?s

average room rate be next year?

b. If the motel operates at 25 percent double occupancy and has an $8.00 spread between its

single and double rates, what will the single- and double-room rates be? Assume only one

common room size, all with the same rates.

3. (9 pts) A restaurant has 144 seats. Total annual sales revenue for next year is projected to be

$1,325,000. The restaurant is open 52 weeks a year and serves breakfast and lunch 6 days a

week. Dinner is served 7 days a week. Seat turnover per day is anticipated to be 2.0 times

for breakfast, 1.5 times for lunch, and 1.25 times for dinner. Sales revenue is derived at 20

percent from breakfast, 30 percent from lunch, and 50 percent from dinner. Calculate the

restaurant?s average check by meal period.

4. (11 pts) A 140-seat dining room had a weekly customer count by meal period and day:

a. For each meal period and for each day of the week calculate the seat turnover.

b. Calculate the average number of customers per day and the average seat turnover for

the week for each meal period.

c. List some of the ways in which the information in parts a and b would be useful to the

restaurant manager or owner.

5. (10 pts) Motley Motel?s potential average room rate is calculated to be $62. Assume that this

motel had three market segments. Vacation travelers use 75 percent of the room nights

and are charged 100 percent of the rack rate. Business travelers use 15 percent of the room

nights and are charged 90 percent of the rack rate. Sports teams account for 10 percent of the

room nights and are charged 80 percent of the rack rate.

a. Calculate the room rate by market segment. (Hint: Refer p.276 of the Jagels text, ?Room Rates

for Each Market Segment? for an example of how to solve this problem)

b. Prove that your calculations are correct, assuming that total annual room nights are 7,300.

ACC6107: Managerial Accounting Assignment #2 Due: November 8, 2016 (please submit a hard copy in class) This assignment is worth 5% of your grade in ACC6107. Please work on this assignment independently and remember to show your work! /70 pts 1. (20 pts) You have the following projections about the costs in a family restaurant for next year: Net income required: 29% net income after tax on the owner's present investment of $340,000, income tax rate is 36%. Depreciation: Present book value (consolidated) of furniture and equipment is $86,000, depreciation rate is 20% Interest: Interest on loan outstanding of $30,000 is 9% Known Costs Insurance License Utilities Maintenance Administration Salaries $3,000 $1,500 $9,300 $4,200 $7,200 $43,200 Variable Costs Food cost, 41% of sales revenue Wage cost, 32% of sales revenue Other costs, 11% of sales revenue a. What sales revenue would the restaurant have to achieve next year in order to acquire the desired net income after tax? b. What is the required average check needed to achieve the annual sales revenue objective if the restaurant is open 360 days, had 80 seats, and have an average seat turnover of 2.4 times per day? 2. (20 pts) A 70- room motel expects its occupancy next year to be 80%. The owners' investment is $802,400. They want an after tax return on their investment of 12%. Tax rate is 25%. Interest on a long-term mortgage is 7%. Present balance outstanding $1,806,400 Depreciation rate on the building is 10% of the present book value $900,200. Depreciation on the furnishings and equipment is at 20% of the consolidated present book value of $355,400 Other known fixed costs total $241,800 a year At 80% occupancy rate, the motel's operating expenses, wages, supplies, laundry, etc. are calculated to be $95,400 a year. The motel has other income from vending machines of $5,200 a year. a. To cover all costs and produce the required net income after tax, what should the motel's average room rate be next year? b. If the motel operates at 25 percent double occupancy and has an $8.00 spread between its single and double rates, what will the single- and double-room rates be? Assume only one common room size, all with the same rates. 3. (9 pts) A restaurant has 144 seats. Total annual sales revenue for next year is projected to be $1,325,000. The restaurant is open 52 weeks a year and serves breakfast and lunch 6 days a week. Dinner is served 7 days a week. Seat turnover per day is anticipated to be 2.0 times for breakfast, 1.5 times for lunch, and 1.25 times for dinner. Sales revenue is derived at 20 percent from breakfast, 30 percent from lunch, and 50 percent from dinner. Calculate the restaurant's average check by meal period. 4. (11 pts) A 140-seat dining room had a weekly customer count by meal period and day: a. For each meal period and for each day of the week calculate the seat turnover. b. Calculate the average number of customers per day and the average seat turnover for the week for each meal period. c. List some of the ways in which the information in parts a and b would be useful to the restaurant manager or owner. 5. (10 pts) Motley Motel's potential average room rate is calculated to be $62. Assume that this motel had three market segments. Vacation travelers use 75 percent of the room nights and are charged 100 percent of the rack rate. Business travelers use 15 percent of the room nights and are charged 90 percent of the rack rate. Sports teams account for 10 percent of the room nights and are charged 80 percent of the rack rate. a. Calculate the room rate by market segment. (Hint: Refer p.276 of the Jagels text, \"Room Rates for Each Market Segment\" for an example of how to solve this problem) b. Prove that your calculations are correct, assuming that total annual room nights are 7,300