Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I have part A completed I just need the required question at the end answered. Thanks : Total Rooms available 200 Total number of days

I have part A completed I just need the required question at the end answered. Thanksimage text in transcribed

:
Total Rooms available 200
Total number of days in a year 365
Total room nights 73000 (200 X 365)
Occupancy Rate 70%
Total number of nights occupied 51100 (730000 X 70%)
Total Lodging Revenue 11242000
Average Revenue per night/per room 220 (11242000 / 51100)
Increase expected in 2nd lodge 5%
New average revenue per night per room 231
Total Number of nights 102200 (51100 for each lodge)
Budgeted Income Statement Notes
Both Lodge
Revenue:
Lodging 23608200 (51100 nights X 231X 2)
Food and Beverage 3892500 (2162500 - 10%) X 2
Miscellaneous 1530000 (765000 x 2)
Total Revenue 29030700
Costs:
Labor 6856500 (450000+ (3597000-450000) X 2) + 25 % of 450000
Food and Beverage 2940000 (1470000 X 2) as variable to nights
Miscellaneous 2570400 (918000 X 2) as variable to nights plus 40%
Management 212000 All fixed
Utilities 5953350 3053000 + 95%
Depreciation 1622600 854000 + 90%
Marketing 2265760 2023000+12%
Other Cost 640000 All fixed
Total Cost 23060610
Net operating income 5970090

After reviewing the budgeted income statement for 2020, management is considering changing to one of the following two different pricing strategies: High Price Strategy: Increase the average price per room to $245 per night. This will reduce demand, with estimated occupancy falling from 70% to 60%. High Occupancy Strategy: Decrease the average price per room to $205 per night. This will increase the occupancy rate from 70% to 80%. All other revenues and variable costs will remain the same with respect to the number of nights. Other costs will not change. REQUIRED: (1) Prepare a budgeted income statement if the High Price Strategy is adopted

Woodview Lodge is a premium, all-suite lodge in the Appalachian Mountains. The lodge has 200 rooms. In its first year of operations (2019), its occupancy rate (number of rooms filled divided by the number of rooms available) was 70%, based on a 365-day year. The average room rate was $220 per night. The basic unit of operation is the night." Which is one room occupied for one night. Operating income for 2019 is as follows: $11,242,000 2,162,500 765,000 $14,169,500 Woodview Lodge Income Statement For the year Ended 12/31/19 Revenue: Lodging Food and Beverage Miscellaneous (@$15 per night) Total Revenue Costs: Labor Food and Beverage Miscellaneous Management Utilities Depreciation Marketing Other costs Total costs Net operating income $3,597,000 1,470,000 918,000 212,000 3,053,000 854,000 2,023,000 640,000 $12,767,000 $ 1.402.500 During 2019, $450,000 of labor was fixed; the remainder varied with respect to the number of nights. Food and beverage cost and miscellaneous cost are all variable with respect to the number of nights. The remaining costs are fixed. At the beginning of 2020, Woodview plans to open a second lodge with the same number of rooms. The occupancy rate is expected to remain the same at 70%. Management has made the following assumptions for 2020: Average room rate will increase by 5% Food and beverage revenues are variable with respect to the number of nights and are expected to decline by 10%. Food and beverage costs are variable with respect to the number of nights. The variable labor rate will not change; however, variable labor costs are expected to increase in proportion to the increase in the number of nights; fixed labor costs are expected to increase 25% The miscellaneous cost is variable with respect to the number of nights and is expected to increase by 40%. Miscellaneous revenue is variable with respect to the number of nights. Total utilities will increase 95%. Total depreciation will increase 90%. Total management costs will increase 38%. Total marketing costs will increase 12%. Other costs are not expected to change. PART A: Prepare a budgeted income statement for 2020 (round all unit variable costs to the nearest dollar)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Of Health Care Organizations

Authors: William N. Zelman, Michael J. McCue, Noah D. Glick, Marci S. Thomas

4th Edition

111846656X, 978-1118466568

More Books

Students also viewed these Accounting questions

Question

What has been your desire for leadership in CVS Health?

Answered: 1 week ago

Question

Question 5) Let n = N and Y Answered: 1 week ago

Answered: 1 week ago