Question

An 80-room motel forecasts its average room rate to be $68.00 for next year at 75% occupancy. The rooms department has a fixed wage cost of $186,000. Variable wage cost for housekeeping is $9.00 an hour; it takes one-half hour to clean a room. Fringe benefits are 18% of total wages. Linen, laundry, supplies, and other direct costs are $2.75 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, 40% of occupied rooms are occupied by two persons and, on average, 80% of overnight guests will eat breakfast. Average breakfast check is $6.50. Lunch seat turnover is 1.5, with an average check of $8.95. The average dinner check is $10.95 and there are 2.0 seat turns for dinner. The snack bar is open 365 days a year for all three meals. Direct costs for the snack bar are 78% of total snack bar revenue. Indirect costs for the motel are estimated at $580,800 for next year. a. Calculate the budgeted contributory income statement for each department and a consolidated total motel departmental income statement to determine operating income. b. Assume that at the end of next year, actual revenue was on 21,700 rooms occupied at an average rate of $68.40; actual housekeeping wages (before employee fringe benefits) were $108,208. 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).

Answer 1

Answer and explanation:

Budgeted rooms to be sold next year: 80 × 75% × 365 = 21,900

a. Budgeted Departmental Contributory Income Statement

$ $

Rooms Department

Sales Revenue: [21,900 * $68.00] $1,489,200

Expenses

Fixed wages expense $186,000

Housekeeping expenses [21,900 * 0.5 *$9.00] 98,550

Subtotal $284,550

Fringe benefits: [18% *$284,550] 51,219

Other costs: [21,900 * $2.75] 60,225 (395,994)

Rooms Contributory income $1,093,206

Overnight guests: 80 rooms * 75% = 60 rooms occupied

40% * 60 = 24 rooms double occupied

84 overnight guests

Average breakfast guests: 80% *84 = 67.2 Guests

Snack bar sales revenue $

Breakfast: [67.2 * $6.50 *365] $159,432

Lunch: [50 * 1.5 * $8.95 * 365] 245,006

Dinner: [50 * 2.0 *$10.95 * 365] 399,675

Total Sales Revenue $804,113

Expenses [78% * $804,113] (627,208)

Snack Bar Contributory Income $176,905

Consolidated Motel Departmental Income Statement

Rooms Contributory Income $1,093,206

Snack Bar Contributory Income 176,905

Total Contributory Income $1,270,111

Less: Indirect, Undistributed Costs (580,800)

Budgeted Operating Income

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