MANAGERIAL ACCOUNTING – exercises – HOSPITALITY OPERATIONS

year 2018-2019

INCOME STATEMENT

Case 1 What happened to your mix of sales?

Determine the mix of sales for 2014, 2015 and 2016 by taking the type of sales as a % of the total
sales.

Type of Sales 2014 % 2015 % 2016 %

Rooms sales € 600,000 € 620,000 € 610,000
Food sales € 200,000 € 180,000 € 150,000
Beverage sales € 100,000 € 90,000 € 85,000
TOTAL SALES € 900,000 € 890,000 € 845,000
What happened to the mix of sales the last 3 years?

Case 2 Type of costs: operating, overhead or fixed charge?

Determine for the following costs whether it’s an operating cost, overhead expense or a fixed charge.

expense operating overhead fixed charges

Cost of food and beverage sold
Depreciation
General manager’s salary
Marketing costs
Laundry expenses
Property fire insurance
Repair and maintenance
Salaries waiters and kitchen staff
Case 3 How profitable is your business?
The controller of hotel-restaurant Happy Together collected the following information for 2016:

Rooms revenues € 1,100,000

Food & Beverage revenues € 500,000
Cost of F&B sales € 100,000
Total operating expenses – Rooms € 300,000
Total operating expenses – F&B € 200,000
Overhead € 500,000
Fixed charges € 300,000

Calculate the following figures:

Departmental income Rooms
Gross profit F&B
Departmental income F&B
Gross operating profit
Overall income

Case 4 Completing an income statement: so many figures!

Present the figures as provided by the controller (see case 3) in an Income Statement according to
USALI.
Income Statement
For the period 2016
Hotel Restaurant Happy Together

Revenu e
Rooms
Food and Beverage
Total Revenue
Departmental Expenses
Rooms
Food and Beverage
Total Departmental Expenses
Total Departmental Income
Undistributed Operating Expenses
. Total Undistributed Expenses
Gross Operating Profit
Fixed Charges
Total Fixed Charges
Net Operating Income
Case 5 Business case – Preparing an income statement based on USALI
The Falcon Road Stop Motel provided you the information below related to their operations of the
last 3 months ending at September 30th 2016. This company has 3 profit centers: rooms, food and
beverage. The management desires to have their end of the quarter income statement established
according to the rules contained in the USALI for external users. The average income tax rate is 32%.
Account
Administration and general expenses 780,000
Advertising 195,000
Beverage department - salaries and wages 260,000
Beverage revenues 1,300,000
Cost of beverage sold 390,000
Cost of food sold 1,170,000
Depreciation 325,000
Food department - salaries and wages 1,040,000
Food revenues 3,510,000
Insurance 130,000
Interest expense 552,500
Utility costs 195,000
Property taxes 325,000
Room revenues 6,500,000
Room department - salaries and wages 975,000
Supplies room department 520,000
Supplies beverage department 97,500
Supplies food department 260,000
Revenue

Total Revenue
Departmental Expenses

Total Departmental Expenses

Total Departmental Income
Undistributed Operating Expenses

Total Undistributed Expenses

Gross Operating Profit
Fixed Charges

Property taxes
Total Fixed Charges
Net Income Before Income Taxes
Income Taxes (32%)
NET INCOME AFTER TAXES
BUDGETING AND VARIANCE ANALYSIS
Case 6 Prepare a flexible operating budget
Use the following information to prepare the rooms department condensed annual budget of the
GAGA Hotel chain for next year assuming that it operates all days of the year. Also apply the vertical
analysis to all 3 budgets:

scenario 1 scenario 2 scenario 3

estimated occupancy percentages 50% 60% 70%

Number of rooms 800

ADR (Average Daily Rate) = Price per room € 120
Fixed salary component € 2,000,000
Variable salary component (related to sales) 40%
Other operating expenses per room occupied € 20
How many rooms are sold per year?
scenario 1
scenario 2
scenario 3

Operating budget scenario 1 % scenario 2 % scenario 3 %

GAGA Hotel

Rooms Revenue

Salary, fixed

Salary, variable

Other operating expenses

DEPARTMENTAL INCOME

Determine which costs increase as a percentage of the sales and which stay on the same level; explain
why.
Case 7 Preparing a departmental budget for rooms dept. of the Bilgaard Passage

Use the following information from the rooms department of the Bilgaard Passage to complete an
annual operating budget based on an occupancy rate of 60%. Compare the actual and the
budgeted figures and determine whether the variance is favourable or unfavourable.

Number of rooms 70 Variable employee benefits (on revenues) 1.5%

ADR € 60 Reservation costs per rooms sold € 2.50
Days 365 Commissions (on revenues) 2.5%
Monthly fixed salary component €20,000 Linen (on revenues) 1.75%
Variable salary per room sold € 18.50 Supplies (per room sold) € 6.25
€
Payroll tax (on all salaries) 12.5% Fixed other monthly expenses 2,250.00
Fixed employee benefits per month € 3,750 Variable other expenses (on revenues) 4%
Additional instructions:
* fixed costs don't vary with the sales, so the annual fixed costs can be calculated by multiplying monthly costs by 12
* Variable costs can be calculated in 2 ways: or multiplying the annual rooms sold by the variable cost per room sold,
or as a % of the total sales
budget actual variance F/U*
Rooms revenues € 940,255.00

Fixed salary € 240,000.00

Variable salary € 301,548.00
Total salary € 541,548.00

Payroll taxes € 72,062.00

Fixed employee benefits € 45,000.00
Variable employee benefits € 10,217.00

Total payroll and related expenses € 668,827.00

Other expenses
Reservation costs per rooms sold € 36,049.00
Commissions (on revenues) € 23,841.00
Linen (on revenues) € 14,862.00
Supplies (per room sold) € 93,428.00
Fixed other monthly expenses € 27,000.00
Variable other expenses (on revenues) € 35,286.00
Total other expenses € 230,466.00

Departmental income € 40,962.00

* F = favourable, U = unfavourable
Case 8 Variance analysis: revenues and expenses

The following table presents a room’s manager’s budget preparation working paper for October. Not
all figures are calculated. Complete this table.
Budget Actual Budget Variance
Room revenue computation:
ADR € 80 € 76
Rooms sold 3,000 3,300
TOTAL REVENUE
Guest supplies expense computation:
Rooms sold 3,000 3,300
Unit cost € 28 € 26
TOTAL GUEST SUPPLIES EXPENSES

After completing the preparation working paper the room’s manager tries to apply the variance
analysis to the revenues and the expenses.
Calculate the price, cost and quantity variances by applying the following formulas.
1) PRICE VARIANCE related to revenue (formula: price difference x actual quantity)

2) QUANTITY VARIANCE related to revenue (formula: quantity difference x budgeted price)

3) COST VARIANCE related to expenses (formula: cost difference x actual quantity)

4) QUANTITY VARIANCE related to expenses (formula: quantity difference x budgeted cost)

Case 9 The Bilgaard Passage

The controller of the Bilgaard Passage Hotel completed the following table:
Budget Actual
ADR € 60 € 62.85
Rooms sold 15,330 14,960

Number of working hours 21,840 22,883

Labour costs per hour € 29.66 € 29.23

1) Calculate the PRICE VARIANCE related to Sales

2) Calculate the QUANTITY VARIANCE related to Sales

3) Calculate the COST VARIANCE related to costs

4) Calculate the QUANTITY VARIANCE related to costs

ELASTICITY & PRICING ROOMS
Case 10 Elasticity

Last year the ADR of a hotel was € 120 and the occupancy rate was 60%. For this year the
management hopes to achieve an ADR of € 112 that will lead to an occupancy rate of 72%.

a. What is the price elasticity of the demand for the rooms of this hotel?
b. What is the kind of elasticity?
c. Which one of the following types of (in)elasticity is presented by the line D1?

Case 11 Elasticity
According to a study of KPMG, the average occupancy rate of Dutch Hotels has increased from 64.5%
in 2012 to 65.2% in 2013. The average room rate however, decreased from €92 to €87. Total revenue
per room decreased from €41,572 in 2012 to €38,425 in 2013.

a. What is the price elasticity of the demand for the rooms in the Netherlands according to this
study?
b. What is the kind of elasticity?
Case 12 The rule of the thousand approach
The total investment in a 200-room hotel is € 28 million and 25% of this investment is related to
other non-rooms related hotel activities.

Determine the price of a room for this hotel applying the rule of the thousand approach.

Case 13 The bottom up approach

Queen Hotels Plc operates a 150-room hotel. The capital invested is € 18 mln and the company is
expecting a net profit of 15% after paying (profit) tax at the rate of 25%. They expect an average
occupancy percentage of 80%.
Rooms departmental expenses are expected to amount to € 3 mln and the profits from other
departments are expected to be € 2 mln. The overhead expenses are € 6 mln.

Determine the AVERAGE ROOM RATE by applying the bottom up approach.

Case 14 The relative room size approach
King Hotels Plc has 2 different room types. 120 rooms of type A and 40 rooms of type B. Type A
rooms measure 18 square meters and type B rooms measure 44 square meters. The occupancy
percentage of the room types are 90 and 60 percent for types A and B respectively. The hotel expects
to make an revenue of at least € 5,475 mln for the next year in which it will be operating all the 365
days of the year.

Calculate the room rates for both types A and B of rooms.

STEP 1 Assess the surface area of the rooms sold daily

STEP 2 Determine the average revenue per day

STEP 3 Determine the average rate to charge each square meter of room space per day

STEP 4 Determine the specific rates (ADR) to charge each room type
Case 15 The Way Ahead
The Way Ahead is a 40-room roadside motel and it expects its occupancy in 2017 to be 75%. The
capital invested in the motel is € 6 mln and 10% of the investment is related to non-room activities.
The motel has 2 different room types, 30 rooms of type A and 10 rooms of type B. Type A rooms
measure 70 square meters and type B rooms measure 60 square meters. The historical occupancy
percentages of the room types are 80% for type A and 70% for type B.
The owners expect an after-tax net profit (return on investment) of 8%. The income tax rate is 35%.
From vending machines and parking charges, they expect to make about € 65,000 in 2014. The direct
expenses of running rooms are expected to be € 400,000, while the overhead expenses for 2014 are
estimated to be as follows:
• Administration and general expenses € 125,000
• Sales and marketing expenses € 68,000
• P.O.M. (property operations maintenance) € 72,000
• Interest € 35,000
• Depreciation € 50,000
• Insurance € 64,000
• Other expenses € 155,000

Based on this information calculate the Average Daily Room rate applying:
a) The rule of a thousand approach
b) The bottom up approach
c) Relative room size approach (step 8 of the bottom up approach will provide you with the
annual sales needed for step 2)
INFORMAL PRICING
Case 16 Informal Pricing
Give a brief description of the approaches to pricing:

1 Rule of thumb

2 Intuitive method

3 Trial and error method

4 Price cutting

5 High Price

6 Competitive method

7 Mark-up method

BASIS OF PRICING:

Fill in this table: COSTS COMPETITION CUSTOMER

1 Rule of thumb

2 Intuitive method

3 Trial and error method

4 Price cutting

5 High Price

6 Competitive method

7 Mark-up method
BREAK EVEN ANALYSIS
Case 17 Break even analysis applied to a rooms department
Afilen Hotels Plc manages 2 hotels along the southern coast – the Blue Beach Hotel and the White
Beach Hotel. In the Blue Beach Hotel the rooms’division manager would like to determine the levels
of occupancy that will permit the hotel attain break even in the following year.

The following information at his disposal is:

Number of rooms 220
Hotel will be open for 365 days
Annual fixed costs related to rooms division are € 6,475,002
The ADR is € 165
The per room variable cost is € 24
Actual annual sales are € 9,750,345
Desired pre-tax annual profit € 1,000,000

Determine the contribution margin per room

Calculate the annual break even volume in rooms and round off in units.

Calculate the annual break even volume in occupancy rate

Calculate the annual break even sales

Calculate the actual quantity.

Calculate the actual occupancy rate.

Calculate the annual margin of safety in revenues

Calculate the annual margin of safety in rooms

Calculate the annual margin of safety in occupancy percentage

Calculate how many rooms(rounded off in full units) have to be sold to generate the desired annual
pre-tax profit. And calculate the desired occupancy rate.
Case 18 Break even analysis applied to a F&B department
During 2016 the average food service check in the Exotic Tastes Restaurant was € 24.50, while the
average variable costs were € 9.25. The average monthly costs were € 24,500. In 2017 the average
variable costs are expected to increase by € 0.75 per meal while the average monthly fixed costs are
expected to rise by € 3,200. The Exotic Tastes Restaurant plans to raise the average prices by € 0.50
in 2017. You’re asked to calculate the following.

OVERVIEW of INFORMATION 2016 increase 2017 without 2017 including

price increase price increase
Average check
Variable costs
Monthly Fixed costs
Contribution margin

Calculate the break even number of meals for 2016

Calculate the break even food sales for 2016

Calculate the break even number of meals for 2017 when the food manager decides to NOT increase
the price because of competitive reasons

Calculate the break even food sales for 2017 when the food manager decides to NOT increase the
price because of competitive reasons

Calculate the break even number of meals for 2017 INCLUDING the increase in price

Calculate the break even food sales for 2017 INCLUDING the increase in price

Compare the break even meals and food sales for 2017 before and after the increase in price.
Calculate the differences.

Explain the relation between the contribution margin and the competitiveness of the price.
Case 19 Break even analysis – Single service analysis PIZZA
Interpret the graph with help of the following information:
Number of seats 80
Number of days open per week 06
Weekly fixed costs € 8,000
Average selling price per pizza € 12
Variable costs per pizza € 4
Desired pre-tax profit € 4,000
Pizzeria is selling one pizza per seat

Calculate
Contribution margin
Break even volume seats
Available seats
Break even seat turnover
Break even revenue
Actual data
Revenues € 15,000
Pizza sold
Seat turnover
Margin of safety
In revenues
In pizzas
In seat turnover

Break even seats - desired

pre-tax profit

COST ALLOCATION
Case 20 Type of Costs
Determine for the following costs whether it’s a direct, indirect, fixed, variable and/or mixed costs
direct indirect fixed variable mixed
Cost of food and beverage sold
Depreciation
General manager’s salary
Guest supplies
Income taxes
Laundry expenses
Property fire insurance
Property taxes
Repair and maintenance
Rooms division salaries
Telephone cost
Case 21 Cost Allocation – Cushy Restaurant

Below is the compressed and unallocated income statement of the Cushy Restaurant. The restaurant is
a complex made of 3 departments: the Organisphere, its organic food diner, the Green Café and the
Swinging Bar.

Cushy Restaurant unallocated income statement 2016

Organisphere Green Cafe Swinging Bar Total
Revenues 4,086,904 2,696,988 2,814,576 9,598,468
Direct costs 3,239,312 2,542,080 2,295,132 8,076,524
Departmental income 847,592 154,908 519,444 1,521,944
All overhead costs 1,159,600
Income before taxes 362,344
Income taxes (28%) 101,456
Net income 260,888

Step 1: allocate all the overhead costs by applying the allocation base % of surface area
m2 % (1 decimal) €
Organisphere 200
Green Café 75
Swinging Bar 90

Step 2: complete the allocated income statement

Cushy Restaurant allocated income statement 2016
Organisphere Green Cafe Swinging Bar Total
Revenues 4,086,904 2,696,988 2,814,576 9,598,468
Direct costs 3,239,312 2,542,080 2,295,132 8,076,524
Departmental income before allocation 847,592 154,908 519,444 1,521,944
Allocated overhead costs 1,159,600
Departmental income after allocation
Income taxes (28%)
Net income
Case 22 Do you understand this statement?
The Blue Ribbon Roadside Inn
Unallocated Income Statement in €
For the year ending December 31st
Depart-
Department Net Cost of Payroll Other mental
revenues sales expenses expenses Income
Rooms 565,000 225,000 102,000 238,000
Food and Beverage 1,590,000 725,000 440,000 75,000 350,000
2,155,000 725,000 665,000 177,000 588,000
UNDISTRIBUTED OPERATING EXP
A&G 96,000 18,000 114,000
Marketing 75,000 16,000 91,000
HRM 69,000 3,000 72,000
POM& UC 58,000 15,000 73,000
TOTAL undistributed operating exp 350,000
INCOME before fixed charges 238,000
FIXED CHARGES
Insurance 40,000
Depreciation 125,000
TOTAL fixed charges 165,000
INCOME before income taxes 73,000
INCOME TAXES 24,000
NET INCOME 49,000
a) What is an unallocated income statement?
b) What is a departmental income?
c) What are undistributed operating expenses?
d) What are fixed charges?
Case 23 Cost allocation – DIRECT METHOD
Additional information related to the allocation bases of The Blue Ribbon Roadside Inn:

Book Value of Fixed

Department Assets (BVFA) Surface (m2) Number of
employees
Rooms € 4,000,000 2,000 06
F&B € 2,500,000 1,500 14
Total Profit Centers € 6,500,000 3,500 20

Allocate the overhead costs to the 2 profit centers Rooms and F&B.

proportion to in % amounts to in €
Costs to be Amount Allocation
allocated in € base ROOMS F&B ROOMS F&B

A&G 114,000 nr of empl

Marketing 91,000 revenues

HRM 72,000 nr of empl

POM & UC 73,000 surface

Insurance 40,000 BVFA

Depreciation 125,000 surface

TOTAL 515,000

Complete the following fully allocated income statement.

The Blue Ribbon Roadside Inn

Unallocated Income Statement in €
For the year ending December 31st

Depart- DEPARTMEN-
Department Net mental ALLOCATED TAL INCOME
revenues Income EXPENSES AFTER
ALLOCATION
Rooms 565,000 238,000
Food and Beverage 1,590,000 350,000
2,155,000 588,000
INCOME TAXES 24,000
NET INCOME 49,000
MIXED COSTS – HIGH LOW 2 POINT METHOD
Case 24 Mixed costs – which part is fixed?
Determine which part of the POM & UC costs (property and operations maintenance & utility costs) is
fixed. Apply the High Low 2 point method.

POM & UC expenses

month rooms sold in €
January 100 2,000
February 110 2,100
March 110 2,200
April 120 2,350
May 130 2,450
June 150 2,850
July 180 3,200
August 210 3,400
September 200 3,350
October 120 2,375
November 090 1,900
December 120 2,400
TOTAL 1,640 30,575

Step 1: determine the difference in total mixed costs and activity:

POM & UC
month rooms sold TOTAL expenses
HIGH
LOW
difference

Step 2: calculate the variable cost per room sold:

Step 3: determine the total VARIABLE POM & UC expenses:

POM & UC VARI-

month rooms sold ABLE expenses
HIGH
LOW

Step 4: determine the total FIXED POM & UC expenses:

POM & UC POM & UC POM & UC total
month TOTAL expenses VARI-ABLE FIXED costs
expenses
HIGH
LOW
Case 25 Try Again

Determine the budget of salaries for next year April, when there are expected to be 7.500 customers.
Apply the High Low 2 point method.

month customers salaries in €

January 6,400 23,250
February 3,840 15,675
March 5,920 27,750
April 7,120 28,500
May 7,040 28,500
June 7,680 30,375
July 8,000 30,750
August 6,240 27,750
September 6,080 27,000
October 4,960 23,250
November 4,640 22,875
December 4,800 24,975
TOTAL 72,720 310,650

Step 1: determine the difference in total mixed costs and activity:

month customers salaries

HIGH
LOW
difference

Step 2: the variable salary cost per customer:

Step 3: determine the total VARIABLE salary expenses:

VARIABLE
month customers salaries
HIGH
LOW

Step 4: determine the total FIXED salary expenses:

salaries salaries VARI- salaries total

month TOTAL expenses ABLE expenses FIXED costs
HIGH
LOW
FINANCIAL ANALYSIS TECHNIQUES
Case 26 What would a controller be without financial analysis techniques?
Apply the TREND ANALYSIS to the income statement of the Three Corners’ Restaurant.
Take 2014 as the 100% year.
2014 2015 2016 2014 2015 2016
Revenues 616,250 659,750 725,847
Cost of sales 159,500 177,625 181,457
Salaries 184,875 216,050 195,814
Laundry 29,000 30,450 32,147
China, glass and silver 7,250 7,975 6,514
Other expenses 116,000 112,375 110,048
Total expenses 496,625 544,475 525,980
Income before taxes 119,625 115,275 199,867
Taxes 38,280 36,888 63,957
Net income 81,345 78,387 135,910

Apply the HORIZONTAL ANALYSIS to the income statement of the Three Corners’ Restaurant.
Calculate the ABSOLUTE and RELATIVE variance.
2014 - 2015 2015 - 2016
2014 2015 2016 € % € %
Revenues 616,250 659,750 725,847
Cost of sales 159,500 177,625 181,457
Salaries 184,875 216,050 195,814
Laundry 29,000 30,450 32,147
China, glass and silver 7,250 7,975 6,514
Other expenses 116,000 112,375 110,048
Total expenses 496,625 544,475 525,980
Income before taxes 119,625 115,275 199,867
Taxes 38,280 36,888 63,957
Net income 81,345 78,387 135,910
Apply the VERTICAL ANALYSIS to the income statement of Three Corners’ Restaurant.
2014 2015 2016 2014 2015 2016
Revenues 616,250 659,750 725,847
Cost of sales 159,500 177,625 181,457
Salaries 184,875 216,050 195,814
Laundry 29,000 30,450 32,147
China, glass and silver 7,250 7,975 6,514
Other expenses 116,000 112,375 110,048
Total expenses 496,625 544,475 525,980
Income before taxes 119,625 115,275 199,867
Taxes 38,280 36,888 63,957
Net income 81,345 78,387 135,910
Case 27 Ratio analysis technique, another useful tool

New Orleans Road Stop

Profit and Loss account
Quarter ending September 30th 2016
Revenues
Rooms department € 6,100,000
Food department € 2,510,000
Beverage department € 360,000
TOTAL REVENUE € 8,970,000
Expenses
Rooms department € 2,495,000
Food department € 1,307,000
Beverage department € 205,000
Administrative and general € 780,000
Sales and marketing € 195,000
Property operation and maintenance € 220,000
Utilities € 195,000
Rent, property taxes and insurance € 455,000
Interest expenses € 525,500
Depreciation € 325,000
TOTAL EXPENSES € 6,702,500
Income before income taxes € 2,267,500
Income taxes € 725,600
Net income € 1,541,900

To be able to calculate all necessary ratios the controller collected the fol-
lowing additional information:

Room sold 100,000

Room available 150,000
Number of guests 95,000
Number of foodcovers 72,000
Cost of food sales € 880,000
Cost of beverage sold € 115,870
Room department - salaries and wages € 975,000
Food department - salaries and wages € 1,640,000
Beverage department - salaries and wages € 360,000
Calculate the following ratios (when calculating a %, round off to 1 decimal) with help of the
above mentioned information.

industrial
this year last year average

- mix of sales

rooms 62.8% 68.0%

food 28.7% 22.5%

beverage 8.5% 9.5%

- food cost % 32.9% 28.6%

- beverage cost% 32.8% 25.4%

- labour cost% 22.4% 24.8%

- occupancy % 65.9% 62.1%

- ADR 36.80 41.80

- REVPAR 24.25 25.96

- average food service check 46.82 50.53

- operating efficiency ratio 57.9% 62.7%

- GOPPAR 44.56 41.78

- profit margin 26.7% 22.9%

Mix of sales = type of sales / total sales
Food cost% = cost of food sales / food sales
Beverage cost% = cost of beverage sales / beverage sales
Labour cost% = total labour cost / total sales
ADR = room sales / rooms sold
REVPAR = room sales / rooms available
Occupancy % = rooms sold / rooms available
Average food service check = food sales /nr of checks
Operating efficiency ratio = GOP / total sales
GOPPAR = gross operating profit / rooms available
Profit margin = net profit / total sales
THE END
EXTRA CASES

Case E1 price elasticity of demand

period 1 period 2
ADR € 100 € 80
Occupancy percentage 60% 66%

Calculate the price elasticity of demand, and qualify it as (in)elastic, unit/perfect/relative?

Case E2 pricing rooms

The investment in a 50-room hotel amounts € 5 mln of which 30% is related to other activities.
a) Calculate the ADR based on the rule of thousand approach.

The investment in a hotel property is € 15 mln. The investors want to achieve an annual rate of
return of 6%. The tax rate yields 25%.
b) Calculate the pre-tax profit according to the bottom up approach.

A hotel has 80 rooms type A, each 20 m2 and 50 rooms type B, each 40 m2. The forecasted
occupancy percentages are 80% and 60% respectively. The general manager estimates to have € 4
mln sales for the coming year.
c) Calculate the ADR based on the relative room size approach.

Case E3 allocation – direct method

department number of overhead

employees expenses
Rooms 10
Food & Beverage 20
HRM 05 € 60,000
Marketing 05 € 25,000

Allocate the HRM expenses with help of the direct method based on the number of employees.

Case E4 a straight line

With help of the High Low 2 point method you can draw a straight line.
The equation is y = a + b x

What does the y, a, b en x represent?

Case E5 1st break even

To cover all costs the owner of a hotel has to sell 5,000 rooms. The variable costs per room are € 30
and the total fixed costs amounts € 400,000.

Calculate the ADR to break even.

Case E6 2nd break even

To break even we have to sell 4,000 rooms. The ADR = € 60 and the total fixed costs are € 100,000.

What are the variable costs per room and what do they represent?

Case E7 3rd break even

A hotel has 120 rooms and is open 365 days a year. The annual fixed costs are € 4 mln, and the ADR =
€ 150. The variable costs per room sold is € 40. The actual sales are € 6 mln.
a) Calculate the contribution margin,
b) Calculate the break even sales
c) Calculate the break even volume in occupancy rate
d) Calculate the margin of safety in occupancy rate

Case E8 favourable or unfavourable, that’s the question

budget actual
ADR € 50 € 52
Costs per room € 20 € 23
Number of rooms sold 2,000 2,100

a) Calculate the price variance related to revenue

b) Calculate the quantity variance related to revenue
c) Calculate the cost variance related to expenses
d) Calculate the quantity variance related to expenses