Hotel Shu La La by Michael Scott Number of rooms 240 $ ADR OCC RevPAR 2019 320 80% 256 $ New Revenues Sales Mix REVENUE Rooms Food & Beverage Other Operated Departments Miscellaneous Income TOTAL REVENUE $ 22,425,600 $ 6,240,000 $ 480,500 $ 40,000 $ 29,186,100 Fixed Cost Variable Cost New VC DEPARTMENTAL EXPENSES Rooms Food & Beverage Other Operated Departments TOTAL DEPARTMENTAL EXPENSES $ 5,157,888 $ 3,868,800 $ 120,125 $ 9,146,813 TOTAL DEPARTMENTAL PROFITS $ 20,039,287 UNDISTRIBUTED OPERATING EXPENSES Administrative & General Marketing Utility Costs Property Operation & Maintenance TOTAL UNDISTRIBUTED OPERATING EXPENSES $ 4,669,776 $ 2,918,610 $ 291,861 $ 350,233 $ 8,230,480 GROSS OPERATING PROFIT $ 11,808,807 Franchise Fees Management Fees $ $ 897,024 708,528 INCOME BEFORE FIXED CHARGES $ 10,203,254 SELECTED FIXED CHARGES Property Taxes Insurance Reserve For Capital Replacement $ $ $ 420,000 62,000 180,000 EBITDA Depreciation Interest Expense Income Before Income Tax Income Tax @ 25% Net Income $ 9,541,254 $ 236,000 $ 20,000 $ 9,285,254 $ 2,321,314 $ 6,963,941 Total CMR New CMR Based on the income statement and the information below: The income tax rate is 25%. Number of rooms is 240, and hotel operates at 80% occupancy. Room, Food & Beverage, and Other Operated Department expenses are directly variable with total sales revenue. Administrative & General: $2,400,000 is fixed, the remainder is variable with total revenue. Marketing $1,240,000 is fixed, the remainder is variable with total revenue. Utilities cost: $180,000 is fixed, the remainder is variable with total revenue. Property Operations & Maintenance: $188,000 is fixed, the remainder is variable with total revenue. Assume both franchise fees and management fees to be fixed. 8. What would the required revenue be if a net income of $9,000,000 is desired? 9. What would the occupancy rate be if a net income of $9,000,000 is achieved at $320 ADR? 10. If the depreciation expense decreases by 100,000, what would the breakeven point be? 11. If the hotel reduces all departmental expenses by 10%, what would the new breakeven be? 12. What would the required revenue be if a net income of $10,000,000 is desired and at the same time the fixed expenses incease by $1,200,000? 8 9 10 Requied Revenue Req Rev OCC BEP with decrease in depreciation BEP if DE decrease by 10% Requied Revenue 11 12 Hotel Shu La La by Michael Scott Number of rooms 240 $ ADR OCC RevPAR 2019 320 80% 256 $ New Revenues Sales Mix REVENUE Rooms Food & Beverage Other Operated Departments Miscellaneous Income TOTAL REVENUE $ 22,425,600 $ 6,240,000 $ 480,500 $ 40,000 $ 29,186,100 Fixed Cost Variable Cost New VC DEPARTMENTAL EXPENSES Rooms Food & Beverage Other Operated Departments TOTAL DEPARTMENTAL EXPENSES $ 5,157,888 $ 3,868,800 $ 120,125 $ 9,146,813 TOTAL DEPARTMENTAL PROFITS $ 20,039,287 UNDISTRIBUTED OPERATING EXPENSES Administrative & General Marketing Utility Costs Property Operation & Maintenance TOTAL UNDISTRIBUTED OPERATING EXPENSES $ 4,669,776 $ 2,918,610 $ 291,861 $ 350,233 $ 8,230,480 GROSS OPERATING PROFIT $ 11,808,807 Franchise Fees Management Fees $ $ 897,024 708,528 INCOME BEFORE FIXED CHARGES $ 10,203,254 SELECTED FIXED CHARGES Property Taxes Insurance Reserve For Capital Replacement $ $ $ 420,000 62,000 180,000 EBITDA Depreciation Interest Expense Income Before Income Tax Income Tax @ 25% Net Income $ 9,541,254 $ 236,000 $ 20,000 $ 9,285,254 $ 2,321,314 $ 6,963,941 Total CMR New CMR Based on the income statement and the information below: The income tax rate is 25%. Number of rooms is 240, and hotel operates at 80% occupancy. Room, Food & Beverage, and Other Operated Department expenses are directly variable with total sales revenue. Administrative & General: $2,400,000 is fixed, the remainder is variable with total revenue. Marketing $1,240,000 is fixed, the remainder is variable with total revenue. Utilities cost: $180,000 is fixed, the remainder is variable with total revenue. Property Operations & Maintenance: $188,000 is fixed, the remainder is variable with total revenue. Assume both franchise fees and management fees to be fixed. 8. What would the required revenue be if a net income of $9,000,000 is desired? 9. What would the occupancy rate be if a net income of $9,000,000 is achieved at $320 ADR? 10. If the depreciation expense decreases by 100,000, what would the breakeven point be? 11. If the hotel reduces all departmental expenses by 10%, what would the new breakeven be? 12. What would the required revenue be if a net income of $10,000,000 is desired and at the same time the fixed expenses incease by $1,200,000? 8 9 10 Requied Revenue Req Rev OCC BEP with decrease in depreciation BEP if DE decrease by 10% Requied Revenue 11 12