need parts a and b please. thanks!
Vernon Cabins is a small motel chain located near state and national parks. Each property is made up of separate cabins. The chain has 10 properties with an average of 15 cabins at each property. In year 1 , the occupancy rate (the number of rooms filled divided by the number of rooms available) was 80 percent, based on a 180 -day season. The properties are closed from late fall until early spring. The average rate was $225 per night per cabin. The basic unit of operation is the "night," which is one cabin occupied for one night. The operating income for year 1 is as follows. Other revenues consist of incidentals (vending machine purchases, supplies, and so on) and forfeited deposits, In year 1 , incidentals revenue averaged $22 per night. Reservations require a deposit. Guests who fail to cancel before three nights prior to a stay forfeit the deposit. In year 1 , forfeited deposits averaged $6 per night. In year 1, the average fixed labor cost was $110,000 per property. The remaining labor cost was variable with respect to the number of nights. The costs of incidentals include $30,000 per season per property. The remaining cost of incidentals is variable with respect to the number of nights. Miscellaneous costs are all variable with respect to the number of nights. Utilities and depreciation are fixed for each property. The remaining costs (management, marketing, and property taxes) are fixed for the firm. At the beginning of year 2 , Vernon will close one of its properties with no change in the average number of rooms per property. The occupancy rate is expected to decrease to 70 percent. Management has made the following additional assumptions for year 2 : - The average room rate will increase by 10 percent. - Incidental revenues per night are expected to increase by 5 percent. - The forfeited deposit revenue per night is not expected to change. - The fixed labor cost is expected to increase by 12 percent per property. The variable labor cost per night is not expected to change. - Incidental cost factors are not expected to change. - The miscellaneous cost for a night is expected to increase by 25 percent. - Utilities costs per property are expected to increase by 20 percent. - Depreciation costs per property are forecast to remain unchanged. - Management costs will increase by 4 percent and marketing costs will decrease by 6 percent. - Property taxes will decrease by $180,000 with the closing of the one property. Problem 13-65 (Static) Prepare Budgeted Financial Statements: Comparing Alternatives (LO 13-5, 6) The managers of Vernon Cabins are considering different pricing strategies for year 2. Under the first strategy ("High Price"), they will work to maintain an average price of $260 per night. They realize that this will reduce demand and estimate that the occupancy rate will fall to 65 percent with this strategy. Under the alternative strategy ("High Occupancy"), they will work to maintain the year 1 occupancy rate of 80% by lowering the average price to $215 per night. Under either strategy, Vernon Cabins will close one of the properties. Required: a. Prepare a budgeted income statement for year 2 if the "High Price" strategy is adopted. b. Prepare a budgeted income statement for year 2 if the "High Occupancy" strategy is adopted. c. Which is the correct pricing strategy for year 2 . repare a budgeted income statement for year 2 if the "High Occupancy" strategy is adopted
