Question:
An 80-room motel forecasts its average room rate to be $66.00 for next year at 75 percent occupancy. The rooms department has a fixed wage cost of $171,450. Variable wage cost for housekeeping is $7.50 an hour; it takes one-half hour to clean a room. Fringe benefits are 15 percent of total wages. Linen, laundry, supplies, and other direct costs are $2.50 per occupied room per day. The motel also has a 50-seat, limited-menu snack bar. Breakfast revenue is derived solely from customers staying overnight in the motel. On average, 30 percent of occupied rooms are occupied by two persons and, on average, 80 percent of overnight guests will eat breakfast. Average breakfast check is $4.00. Lunch seat turnover is 1.0, with an average check of $6.50. The average dinner check is $9.50 and there are 1.25 seat turns for dinner. The snack bar is open 365 days a year for all three meals. Direct costs for the snack bar are 75 percent of total snack bar revenue. Indirect costs for the motel are estimated at $578,800 for next year.
a. Calculate the budgeted net income of the motel for next year.
b. Assume that at the end of next year, actual revenue was on 21,700 rooms occupied at an average rate of $66.30; actual housekeeping wages (before employee fringe benefits) were $87,957. Analyze room revenue for price and sales volume variances and housekeeping wages for cost, quantity, and sales volume variances; assume it took 32 minutes to clean each room actually occupied (sold).