The first step in preparing a pro forma budget for year 2 from the Year 1 income statement is to analyze the Year 1 income statement. Occupancy days are key to every calculation that involves variable factors. 1. In year 1 there are 10 properties with 15 cabins with 80 percent occupancy for 180 days (10 * 15 * .8 * 180) = Yr 1 Occupancy Days You can verify this equation by multiplying the number of occupancy days * $225 to confirm that it gives you the Year 1 lodging revenue on the income statement. To calculate year 2 projected revenue and and costs, adjust the equation above to get the estimated occupancy days for Year 2 based on the change in number of properties and forecast occupancy rate. 2. To get revenues per occupancy day divide the revenue on the yr 1 statement by the number of occupancy days. You will use that to calculate Yr 2 revenues in each category based on the assumptions for yr 2 in the problem. 3. Labor cost is a mixed cost as noted in the problem. The first step is to prove the year 1 labor cost and calculate the variable cost per occupancy day. The fixed cost portion is 110,000 per property. Note that there are 10 properties in year 1 and 9 in yr 2. For Yr 1, calculate the fixed cost portion by multiplying 110,000 times the number of properties. To get the variable cost amount subtract the fixed cost you just calculated from the total 1,748,000. Take that amount and divide it by the number of occupancy days to get the variable labor cost per day