Task 1 You have been asked to review the performance of the group’s hotel in Sco

Question

Task 1
You have been asked to review the performance of the
group’s hotel in Scotland. You have in front of you the
results for this year (based on some actual results and
some forecasts to the end of this year): Quarter Sales Revenue ($) Profit/ Loss ($) 1 2 400 1,200 (280) 360


3 4
1,600 800
680 40 Total 4,000 800
Additional Information: o The total estimated number of guests (guest
nights) for this year is 50,000, with each guest
night being charged at the same rate. o The results follow a regular pattern; there are
no unexpected cost fluctuations beyond the
seasonal trading pattern.  
For next year, an increase in unit variable cost of 10
percent and a profit target for the hotel of $1 million is
anticipated. These need to be incorporated into the
hotel’s plans.
Help the management at Viago by: o Calculating the total variable and total fixed
cost of the hotel for this year. Show the
provisional annual results for this year in total,
showing the variable and fixed costs separately.
Also, show the revenue and cost per guest. o Determining: The required revenue rate per guest to
meet the profit target, if there is no
increase in guests for the next year.


The number of guests required to meet
the profit target, if the required revenue
rate per guest is not raised above this
year’s level.

Explanation / Answer

Workings

Ans 1 Cost at highest point       9,20,000.00 Cost at lowest point       6,80,000.00 Differential Cost     2,40,000.00 Sales units at highest point           5,000.00 Sales units at Lowest point        20,000.00 Differential Sales units        15,000.00 Variable Cost Per Guest=Differntial Cost of highest and lowest point/Differential Sales units                 16.00 Total VC at the level of 20000 Guests     3,20,000.00 Fixed Cost=Total Cost at 20000 guests-VC Per Quarter     6,00,000.00 Fixed Cost Per Annum 24,00,000.00 Ans 2 Provisional Annual Resutls Sales   40,00,000.00 Less Variable Cost 50000*16     8,00,000.00 Less Fixed cost 24,00,000.00 Total Cost 32,00,000.00 Profit     8,00,000.00 Ans 3 Dsired Additional Profit next year=1000000-800000     2,00,000.00 Additional Contribution Per Unit Required =200000/50000                   4.00 Increase in Tarfiff required=80+4                 84.00 Ans 4 Additional Guest required=Additional Contribution Required/Contrbution Per Unit 200000/(80-14)           3,125.00 Total Guest 50000+3125        53,125.00

Workings

Q1 Q2 Q3 Q4 Total Sales     4,00,000.00 12,00,000.00 16,00,000.00 8,00,000.00 40,00,000.00 Profit(Loss) -2,80,000.00     3,60,000.00     6,80,000.00      40,000.00     8,00,000.00 Cost     6,80,000.00     8,40,000.00     9,20,000.00 7,60,000.00 32,00,000.00 No of Guests           5,000.00        15,000.00        20,000.00      10,000.00        50,000.00 Total Sales 40,00,000.00 Total Guest         50,000.00 Tariff Per Guest                 80.00

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.