Number of rooms 180 2019 2020 Budget Selo Melo Hotel is a 180-room property with food and beverage operations. The CEO projects the ADR to be at $236 and the Occupancy to be at 85% in 2020. ADR 228 F&B department's revenues are expected to increase by 8%. Other Operated Departments revenues are expected to decrease by 3%. Miscellaneous Income of OCC 82% $105,000 is expected in 2020. RevPAR $ 187 The expected changes to the some of the expenses are as follows: REVENUE $ 12,283,272 Management company is planning to expand the hotel by adding a rooftop bar and restaurant. The plan will increase the F&B revenues by $480,000 and Rooms increase the room occupancy by 3-percent points in 2021. The rooftop will increase the fixed part of Administrative and General expenses by $90,000, interest Food & Beverage 3,261,673 expense by $12,000, and the depreciation expense by $36,000 in 2020. Other Operated Departments 376,417 Miscellaneous Incom 102,168 A new position for social media manager is projected to be open and filled by May 2020. The posted salary for the position is $48,000. TOTAL REVENUE $ 16,023,530 Cost Behavior: DEPARTMENTAL EXPENSES Rooms S 3,684,982 Room, Food & Beverage, and other operated departments expenses are directly variable with respective sales revenues. 750,185 Administrative and general: 600,000 is fixed (same as 2019 but consider the new salary and the investment cost), the remainder is variable with total revenue. Food & Beverage Marketing: $530,000 is fixed, the remainder is variable with total revenue. Other Operated Departments 143,110 Utilities cost: $167,000 fixed, the remainder is variable with total revenue. TOTAL DEPARTMENTAL EXPENSES 4,578,276 Property Operations & Maintenance: $190,000 is fixed, the remainder is variable with total revenue. Franchise fees: 4.5% of the Total Revenue. TOTAL DEPARTMENTAL PROFITS $ 11,445,254 Management fees: 8% of the GOP. The property taxes and insurance expenses are same as 2019. UNDISTRIBUTED OPERATING EXPENSES Capital Reserve: 2% of the GOP. Administrative & General 708,135 Depreciation and interest expense are fixed (same as 2019 plus the new depreciation and interest expenses as noted above). Marketing 663,343 The income tax rate is 28%. Utility Costs 321,555 Based on given information above and the previous year's income statements, prepare the operation budget for the year 2020. Property Operation & Maintenance 344,732 TOTAL UNDISTRIBUTED OPERATING EXPENSES 2,037,765 GROSS OPERATING PROFIT $ 9,407,489 Franchise Fees 736,996 Management Fees 752,599 INCOME BEFORE FIXED CHARGES $ 7,917,894 SELECTED FIXED CHARGES Property Taxes 371,700 Insurance 53,600 Reserve For Capital Replacement 171,091 EBITDA 7,321,503 Depreciation 342,000 Interest Expense 98,000 Income Before Income Tax 6,881,503 Income Tax 1,926,821 Net Income 4,954,682