Question 9.45 on the Dorquary Hotel
Computation of budgeted room revenue for each of the three months
Budget- It is prepared to calculate the revenue and budget of the hotel for the three month. This three month budget has been prepared to identify the total revenue and expenses incurred by Dorquary Hotel for its business functioning.
These are the details of the rooms and occupancy which are given in below list.
|
Rooms Available |
20 |
|
Rooms rate |
180 |
|
Rooms occupancy |
90% |
|
In Jan, |
|
|
Rooms rate |
180+10% |
|
Rooms occupancy |
95% |
|
In Feb, |
|
|
Rooms rate |
180+10% |
|
Rooms occupancy |
85% |
These all the information has been given in the question and room occupancy rate has been computed on the basis of same.
Computation of budgeted room revenue
|
Statement of budgeted room revenue |
|||
|
Dec |
Jan |
Feb |
|
|
Rooms available |
20 |
20 |
20 |
|
Rooms occupancy |
90% |
95% |
85% |
|
Total used rooms (Rooms available * rooms occupancy) |
18 |
19 |
17 |
|
Room rate |
180 |
198 |
198 |
|
Room revenue (total used room * rooms rate) |
3240 |
3762 |
3366 |
It is evaluated that occupancy rate of the Dorquary Hotel is determined on the basis of season and other external factors of the business. Room revenue is increased with the increased rate of occupancy. It is evaluated that in the peak season such as December and Jan revenue of the rooms will be increased. The occupancy rate is increased in December and Jan due to high demand of the clients in market. Ideally, December is the peak time when people like to enjoy their life by taking offs (Ekren, Ekren & Ozerdem, 2009).
There are other factors which will affect the occupancy rate of Dorquary Hotel
Question 2.572
Answer to question no-1
After evaluating the details and related facts of the case, it is observed that Anitah loh being a salesperson has given a lucrative offer to Mr. Smith to influence his choice of decision to buy software packages for his company. However, offer given by Anitah Loh is to influence Mr. Smith to come down to check the company’s offered software packages (Bardach & Patashnik, 2015).
Ethical concern
In this case, it is observed that Mr. Smith should not take this offer. If he wants to check the software packages offered by Anitah Loh then he should go and check that products on his own. This will keep Mr. Smith at the position where he could independently analysis whether these software packages should be purchased by company for preparing budget or not.
Answer to question no-2
Advantages and disadvantages to Practical Solutions Ltd of having an employee code of conduct (Brigham & Ehrhardt, 2013).
|
Advantage |
Disadvantage |
|
· It will increase the regulatory compliance of the organization. · It would surely result to keeping high ethical compliance. · It will help company to adopt standard code of conduct and employees oriented organization culture. · It will help employees to determine the limit or conditions while performing work in organization. · If Practical Solutions Ltd has proper code of conduct then it will increased the transparency of business and motivates all the employees to work ethically in determined approach. · All the regulatory compliance and workmen oriented policies will be kept at the top most priority. |
Setting code of conduct will increased the complexity of the business. It will increase the formal regulatory compliance and cost of the production of company. Practical Solutions Ltd has to follow set compliance program before implementing any rules and procedure before adapting to newly installed changes in value chain activities. It will increase the employee turnover and result to increased cost of capital of company. This will destruct the balance score card and will provide less efficient Key person indicators of company. |
Chloe Enterprises operates a single-product entity and in this part of the paper there are several computations has been done as below (Frias?Aceituno, Rodríguez?Ariza, & Garcia?Sánchez, 2014).
Answer to question-(a)
Computation of the break-even point- This point of the Chloe Enterprises reflects the point at which there will be no loss no profit.
|
a) Calculation of breakeven point |
||
|
Per unit |
Total |
|
|
Selling price |
$ 60 |
$ 21,00,000 |
|
Less: |
||
|
Variable cost |
$ 40 |
$ 14,00,000 |
|
Contribution (Sales – variable cost) |
$ 20 |
$ 7,00,000 |
|
Fixed cost |
$ 4,90,000 |
|
|
Break-even point (Fixed cost / contribution) |
24500 |
$ 14,70,000 |
Breakeven point of the company is 24500 in units and 14, 70,000 rupees in dollars.
Computation of margin of dollar of the company
|
B) Calculation of Margin of safety |
||
|
In units |
In dollars |
|
|
Margin of safety (Sales – breakeven point) |
10500 |
$ 6,30,000 |
Margin of safety
Margin of safety is the point where the company earns the profit. The margin of safety units of the company is 10500 units and in the dollars, it is 6, 30,000 (Vardon, Birt & Ingram, 2017).
Total profit of company- It is the amount of profit which company has earned through its business system. This profit will be changed as changed in the units of the company to 32000 units (Christensen & Kent, 2016).
|
C) Calculation of total profit |
||
|
Per unit |
Total |
|
|
Total sales |
$ 60 |
$ 19,20,000 |
|
Less: Variable cost |
$ 40 |
$ 12,80,000 |
|
Less: Fixed cost |
$ 4,90,000 |
|
|
Profit (total sales – fixed cost – variable cost) |
$ 1,50,000 |
The total profit of the company would be $ 2, 10,000.
Marketing strategy- These marketing strategies are implemented with a view to increase the overall profit and turnover of the company.
|
D) Calculation of sales unit on the basis of desired profit |
||
|
Per unit |
Total |
|
|
Selling price |
$ 60 |
$ 21,00,000 |
|
Less: |
||
|
Variable cost |
$ 44 |
$ 15,40,000 |
|
Contribution (Sales – variable cost) |
$ 16 |
$ 5,60,000 |
|
Fixed cost |
$ 4,10,000 |
|
|
BEP |
24500 |
1470000 |
|
Desired Profit |
$ 1,50,000 |
|
|
Sales units to achieve the desired profit (Desired profit / contribution + sales units) |
33875 |
$ 20,32,500 |
Through this calculations, it has been found that if the company wants to achieve the profit of $ 210000 than the company must sales at least 37625 units to achieve the level (Brigham & Ehrhardt, 2013).
In this case, I would not recommend changes proposed in option-D as increment in the variable cost is seen due to increased level of sales. However, at the same time, it will decrease the overall fixed cost of company. Therefore I would suggest company to accept the proposed changes.
References
Bardach, E., & Patashnik, E. M. (2015). A practical guide for policy analysis: The eightfold path to more effective problem solving. CQ press.
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.
Christensen, J., & Kent, P. (2016). The decision to outsource risk management services. Accounting & Finance, 56(4), 985-1015
Ekren, O., Ekren, B. Y., & Ozerdem, B. (2009). Break-even analysis and size optimization of a PV/wind hybrid energy conversion system with battery storage–a case study. Applied Energy, 86(7), 1043-1054.
Frias?Aceituno, J. V., Rodríguez?Ariza, L., & Garcia?Sánchez, I. M. (2014). Explanatory factors of integrated sustainability and financial reporting. Business strategy and the environment, 23(1), 56-72.
Vardon, M., Birt, J., & Ingram, J. C. (2017). . Business and National Accounting for Natural Capital–Toward Improved Understanding and Alignment. Better Policy through Natural Capital Accounting: Stocktaking and Ways Forward, 215.
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