Management and Cost Accounting (BUSN9117)

Semester 2, 2020
Assignment Part 2
Topic coordinator: Cheryll Lim

Student details

Student Full name

Student MANPREET KAUR
Student ROBERT CROUCH
 A. Contribution Margin Income Statement

Lux Hotel
Contribution Margin Income Statement
Bed 1 (Single) Bed 2 (Double) Bed 3 Total
(Penthouse)
Sales Revenue $433,620 $1,073,100 $383,250 $1,889,970
Variable Costs:
Staff Costs (78,052) (193,158) (68,985) (340,195)
Purchases (65,043) (160,965) (57,488) (283,496)
Marketing Costs (21,681) (53,655) (19,163) (94,499)
Utilities Cost1 (13,008.6) (32,193) (11,497.5) (56,699.1)
Maintenance Cost2 (39,025.8) (96,579) (34,492.5) (170,097.3)
Total Variable Cost (216,810.4) (536,550) (191,626) (944,986.4)
Contribution Margin 216,809.6 536,550 191,624 944,983.6
Fixed Costs:
Administration Costs (50,000) (100,000) (50,000) (200,000)
Utilities Cost3 (5,400) (10,800) (5,400) (21,600)
Maintenance Cost4 (9,000) (18,000) (9,000) (36,000)
Other Operating (75,000) (150,000) (75,000) (300,000)
Expenses
Total Operating Expenses (139,400) (278,800) (139,400) (557,600)
Net Profit $77,409.6 $257,750 $52,224 $387,383.6
1
Variable utilities cost =

Bed 1 = $433,620 x 0.03 = $13,008.6

Bed 2 = $1,073,100 x 0.03 = $32,193

Bed 3 = $383,250 x 0.03 = $11,497.5

2
Variable maintenance cost =

Bed 1 = $433,620 x 0.09 = $39,025.8

Bed 2 = $1,073,100 x 0.09 = $96,579

Bed 3 = $383,250 x 0.09 = $34,492.5

3
Fixed utilities cost =

Bed 1 = 180 x $30 = $5,400

Bed 2 = 360 x $30 = $10,800

Bed 3 = 180 x $30 = $5,400

4
Fixed maintenance cost =

Bed 1 = 180 x $50 = $9,000

Bed 2 = 360 x $50 = $18,000

Bed 3 = 180 x $50 = $9,000

B. Calculate sales mix (based on accommodation revenue) for Lux Hotel.

Bed 1: $433,620 / $1,889,970 = 0.22943

0.22943 x 100 = 22.94%

Bed 2: $1,073,100 / $1,889,970 = 0.56779

0.56779 x 100 = 56.78%

Bed 3: $383,250 / $1,889,970 = 0.20278

0.20278 x 100 = 20.28%

C. Calculate the weighted average contribution margin (WACM) per night

stay of each room type and total WACM.

Number of rooms 9 12 3 24
Bed 2 Bed 3
  Bed 1 (Single) (Double) (Penthouse) Total

Accommodation Revenue 433,620 1,073,100 383,250 1,889,970

(536,550.00
Total Variable Cost (216,810.00) ) (191,625.00) (944,985.00)

Contribution Margin1 216,810.00 536,550.00 191,625.00 944,985.00

Calculate sales mix (based on

accommodation revenue) 22.94% 56.78% 20.28% 100.00%
Weighted average contribution
margin (WACM) per room2 49,743.20 304,646.00 38,857.91 393,247.11

Weighted average contribution $1,077.39

margin (WACM) 3

1
Contribution Margin =
Bed 1 = $433,620 - $216,810 = $216,800

Bed 2 = $1,073,100 - $536,500 = $536,550

Bed 3 = $383,250 - $191,625 = $191,625

Total = $216,800 + $536,550+ $191,625= $944,985

2
Weighted average contribution margin (WACM) per room =

Bed 1 = $216,810 x 22.94% = $49,736.21

Bed 2 = $536,550 x 56.78% = $304,653.09

Bed 3 = $191,625 x 20.28% = $38,861.55

Total = $49,733.92 + $304,653.09 + $38,861.55 = $393,250.85

3
Weighted average contribution margin (WACM) per night =

393,250.85/365= 1,077.4

Break Even Point in Units

(d) Determine the overall break-even level of rooms and number of night
stay of each room type.

Bed 1= 139400/220= 634

Bed 2 = 278800/ 350= 797

Bed 3 = 557600/700= 797

e) Calculate the margin of safety per room type.

In. Units

Bed 1= 1971 – 634 / 1971 = 67.83 %

Bed 2 = 3066 – 797 / 3066 = 74.01%

Bed 3= 548 – 797 / 548 = - 45.44%

In Dollars

Bed 1 = 433620 – 139400.80 / 433620 = 67.85 %

Bed 2= - 1073100 - 278799.50/ 1073100 = 74.02 %

Bed 3 = 383250 – 557599 / 383250 = - 45.49%

(f) Suppose that Lux Hotel desires to earn a $500,000 profit. Determine the
occupancy rates required to earn the desired profit.

557600 + 500000 / 1077.4 = 981.62

981.62 x 22.94 = 225 x220 = 49540.40

981.62 x 56.78 = 557.36 x 350 = 195223

981.62 x 20.28= 199.07 x 700 = 139350

5584.50/ 981.62 = 68.69%