Problem: Revenue Variances - Sleepy Hollow Hotels, Ltd.
Sleepy Hollow Hotels, Ltd. (SHHL) operates two hotels in the Metro region. Each hotel has two grades of rooms: standard and deluxe. SHHL has a total of 300 deluxe rooms and 700 standard rooms in the region.On June 17, 20x6, the: executive committee of SHHL met to review its second-quarter results. Thefollowing are excerpts from the meeting.
Brian Grant, President:
"Preliminary results from our second quarter indicate that Suzie Paquin, our newvice-president of sales, should be recognized for a job well done. It seems clear to me that our newincentive bonus program, consisting of a sales commission based on total sales in addition to a basesalary, is working. As you will see in Exhibit 1, revenues exceeded those projected for the period. Overalloccupancy was up slightly despite a decrease in the overall market demand. In particular, the marketresponded enthusiastically to our deluxe rooms, on which Suzie placed particular emphasis."
Ann Tait, Controller:
"Excuse me, Brian, but your description of last quarter's performance may beoverly optimistic. There were several occasions when our regular customers had to be turned away because all deluxe rooms were occupied. Also, the contribution margins for both types of rooms weredown. I'll need to prepare a variance analysis before I can make any conclusions."After the meeting, Brian Grant directed Ann Tait to do the following:1. Analyze the second-quarter results, including a detailed variance analysis. Comment on the overall performance of SHHL and explain the significance of the variances from budget. 2. Comment on the performance evaluation of Suzie Paquin, Vice-President of Sales.
Required: As Arm Tait, the controller for Sleepy Hollow Hotels Ltd., prepare a report to the president, Brian Grant.