DVY plc recently acquired Valuestays (to become division V).Valuestays offers low-price hotel accommodation around the UK and parts of Europe. Although each hotel has much of the same features (branding, room design, etc), there is variability in the rates charged and the facilities offered at hotels across the division.

DVY plc has appointed you to be consulting manager to the Malta hotel, and to assess and advise on its performance.The hotel has 200 rooms and is open for 364 days per year (with one night closed for the annual staff party).Each room has the same furniture and facilities and room rates are all 45 per room.

You have decided to look at a typical week of occupancy as a basis for your review, as considered by the figures below (excluding national holidays and events).

Day

Occupied Rooms

Total Costs

Sun 85 4,000

Mon 100 4,625

Tues 130 5,250

Wed 140 5,500

Thurs 165 6,300

Fri 185 7,400

Sat 195 7,850

Total 1,000 40,925

Required:

a)Calculate the daily break-even occupancy in rooms and in sales revenue.(9 marks)

b)ANALYSIS:

(i)Calculate the margin of safety for Saturdays and Sundays, expressed as the number of rooms and as a percentage of sales, and explain the results.(2 marks)

(ii)What is the maximum operating profit per week under full occupancy?(3 marks)

(iii)What volume of sales would be required to achieve an operating profit of 15,000 per week?(3 marks)

(iv)What selling price would have to be charged to give a weekly profit of 15,000 on an average 80% occupancy?(3 marks)

PTO...

EVALUATION / COMMUNICATION

c)Write a report to the DVY Plc Project Review Director: Explain the outcomes and any considerations you feel you need to further explore?(10 marks)

TRANSFER PRICING

d)Division D would like to have a conference at the hotel in one month. 50 rooms are required for 2 nights (Wednesday and Thursday).

The manager of the hotel has been asked to provide these at40/night.He has asked you for your advice.

WORKING CAPITAL MANAGEMENT

a)According to DVY plc corporate policy, the average age of trade receivables and trade payable should both be 10 days and 20 days respectively.However, you have been informed that for the Malta hotel at 30th September 2018, the average age was 25 days for trade receivables and 10 days for trade payables.

Evaluate how the hotel could better manage its working capital.