The Towne Motel has 10 rooms and it open year round. It has no food or beverage facilities. We'll assume you would like to achieve a net after-tax income of approximately $3000 for the year, which is a 10% return on equity of $30,000 The division of your budget into planning periods are best defined as May 1-October 31 and November 1 - April 30 since the Towne Motel is located in a summer tourist area. The factors and trends expected to affect your business. The Towne Motel has been in business for 10 years and you have developed a solid relationship with your repeat gueats. You do not anticipate any major changes in demand by this market. However, a local motor-inn of comparable facilities has just gone out of business. As a result, you feel your annual occupancy should increase by 5%. The local economy is stable. However, you expect a general increase in prices of 8%. Some rooms will require small renovations $1700 will be spent in June and $1300 will be spent in December Your marketing budget is $650 for May-Oct. and $850 for winter season O Administrative and general expenses are estimated at $ 700 for May- Oct. and $650 for Nov - April 2 Estimate Telephone revenues at $1.50 per occupied room night and Other income at 1% of total reveunes. The owners withdrew $2500 semi annually as drawings from the businessand managed to repay $350 monthly in debt to the local bank Projected Last Year Occupied Room Nights May - October 1345 75% 1281 70% November - April 1204 68% 1147 63% Double Occupancy factor May-October 2.0 November - April 1.3 2.0 1.3 Room Rates Single Double $ 20.00 $ 18.00 $ 24.00 $ 22.00 Room Revenues May-October November - April =E48 054: Room Revenues May-October E48 054 November - April Total Show your calculations 8 Points PROJECTED # OF OCCUPIED ROOMS Last Year May-Oct 10 x 183 x .75 Nov-Apr 10 x 182 x .68 1372.5 1237.6 1281 1146.6 Double Differential Formula A Double Rate x # Rooms Available x # of days in period B 24 10 Single Rate x # Rooms Available x # of days in period Room Revenue 20 # 10 [Double 183 43920 40260 183 36600 32940 A-B 7320 7320 occupied Occupancy x Double (Single Rate x Rooms)+ factor-1 Differential) May-Oct X Occupancy %] 28182 Double Differential Formula A Double Rate x # Rooms Available x # of days in period B 24 10 Single Rate x # Rooms Available x # of days in period Room Revenue 3 Points 20 (Single Rate May-Oct Nov-Apr 10 183 43920 40260 183 36600 32940 A-B 7320 7320 # [Double occupied Occupancy x Double X Rooms)+ factor-1 Differential) X Occupancy %] 28182 22029.48 50211.48 1 Assumptions made to prepare Expenses Forecasts 2 Variable expenses are estimated based on projected volumns 3 4 Salaries, Wages and Employee Benefits 61 maid @ $11,000 71 grounds keeper (summer student) @ $4000 9 Owner's Salary is $12,000 annually 0 Employee Benefits @ 8% of Salary & Wages 1 2 Other Expenses 3 Room Expenses Subtotal 4 Other room expenses are 6% of room sales at the Towne Motel 5 Telephone Expense 6 Estimated at 140% of telephone revenues 7 Energy Cost 8 Energy cost were $3000 last year. Due to a slight 9 increase in occupancy and an anticipated increase of 08% the estimate for next year is $3400. 1 35% summer and 65% winter 2 Property Operation and Maintenance 3 If possible, you should cost any planned renovations; Assignment Assumptions Operating budget Cash Budget H May-Oct Nov-Apr B D increase in occupancy and an anticipated increase of 8% the estimate for next year is $3400. 35% summer and 65% winter Property Operation and Maintenance If possible, you should cost any planned renovations; in addition. A base amount should be included We have assumed that $1700 was spent in the first period and $1300 was spent in the second period Your marketing budget and Administrative and General Expenses are estimated Financial and Other Expenses Interest expenses are obtained from Mortgage Co. Towne Motel interest charges are $6750 for year B Local Insurance estimates premium $750/year Based on CCA and asset values depreciation is projected at $3000 5 Municipal Taxes 5 Estimate based on local municipal tax department $1500 annually The projected income tax that will be applied is 28% 8 Last years closing cash balance was $3000 9 0 1 9 G H 650 850 700 650 + 15 Points Towne Motel Annual Operating budget Period Ending April 30 May-October Revenues Guest Rooms Telephone Other Income O Total 1 2 Operating Expenses B Salaries & Wages 4 Employee Benefits 5 Direct Operating Expenses 6 Administration & General 7 Marketing 8 Property Operation & Maintenance 9 Energy Costs 0 Total 1 2 Income Before Fixed Charges 3 Budget Actual Budget November - April Actual Assignment Assumptions Operating budget Cash Budget Tables illustrations Add-ins X