The Selena's Hotel, opens 365 days, consists of an 80 rooms hotel and a 60 seats coffee shop. Tamika, the Managing Director, provides you with the following information:

i. Of the 80 rooms 60 are doubles and 20 are singles

ii. The doubles are sold for $180 each and the singles are sold for $90

iii. Forecast occupancy is 84% for doubles and 78% for singles

iv. The average occupancy per room is 1.8 (only one person stays in a single room and two persons stay in a double room).

v. 40% of those guests staying in the double rooms and 20% of the guest staying in the single rooms have breakfast in the coffee shop. The average check is $5.80. (There is no walk-in business for the coffee shop).

vi. The lunch and dinner have seat turnover and average checks as shown below: Days Lunch Dinner Turnover Av. Ck. Turnover Av. Ck. Mon - Fri 1.25 $5.20 1.0 $10.20 Sat 0.5 7.50 1.0 12.50 Sun 1.5 8.00 .5 15.00

vii. The first day of the year for which you are to prepare the budget is a Monday

viii. The food cost percentage is estimated to be 35%

ix. The labour cost percentages are as follows:

Rooms: 20%

Food: 32%

x. Other direct operated expenses include:

Rooms: 10%

Food: 12%

xi. Undistributed operating expenses are as follows:

$100, 000 of fixed expenses and the remainder is 10% of the total revenue

xii. Other fixed costs include the followings:

Property taxes $30,000

Depreciation $60,000

Interest $50,000

xiii. Selena's Hotel pays tax at a rate for 30% per year.

You are required to prepare the:

a. Prepare the operating budget for the year, (your answer should be tabulated).

b. As a student of management accounting you were asked to prepare a report for management based on the figures in the budget and explain to management how, giving examples, they can improve on the business' profitability.