BUSN9117

Management and Cost Accounting

ASSIGNMENT Part 2
CVP Analysis (14%)

Semester 2, 2020

Topic Coordinator: Dr Cheryll Lim

Instructions – please note carefully

1. This is a GROUP assignment. Due on 18 September 2020 4pm.

2. Extensions In general, extensions will NOT be granted unless an extension request is

accompanied by a medical certificate or there are extraordinary circumstances that make
lodgement on time impossible. A request for an extension MUST be made BEFORE the due
date and time of the assignment otherwise it will normally not be approved.

3. Late penalties Any assignment not lodged by the due date and time will be deemed to be
late and will attract a late penalty of 5 Marks for every day late – including weekends (eg
if you lodge your assignment on Monday instead of the previous Friday due date, you will
attract a penalty of 15 Marks off your score because you are three days late – in other
words if you score 70% for the assignment and are three days late, you will score only
55%).

4. Lodgement This is a group submission - ONLY ONE PERSON in the group is to lodge the
report. The student lodging the report MUST attach a cover sheet containing the full names
(ie First name and Family name) of ALL members of the group.

5. Academic Integrity. Plagiarism and other forms of academic dishonesty are treated as
serious offences by the University and are subject to harsh penalties, which may include
expulsion from the University. Ensure that you have read and understood the University’s
policy on academic dishonesty, as contained in the Student related Policies and Procedures
Manual, for further information refer
http://www.flinders.edu.au/ppmanual/student/academic-integrity.cfm
 Lux Hotel 5-Star
Hotel Configuration Bed 1 Bed 2 Bed 3 Total
(Single) (Double) (Penthouse)

area per room (square metres) 20 30 60

number of rooms
first floor - 240 square metre 3 4 1
second floor - 240 square metre 3 4 1
third floor - 240 square metre 3 4 1
number of rooms 9 12 3 24
floor space (square metres) 180 360 180 720
planned occupancy rate (%) (open 365 days) 60% 70% 50% 63%
average selling price ($/room/night) 220.00 350.00 700.00 345.00

Budgeted Income Statement

Bed 1 Bed 2 Bed 3 Total

(Single) (Double) (Penthouse)

$ $ $ $
Accommodation Revenue 433,620 1,073,100 383,250 1,889,970
Cost of Goods Sold
Staff costs1 78,052 193,158 68,985 340,195
Purchases (toiletries, sheets, towels etc.)2 65,043 160,965 57,488 283,496
Total Cost of Goods Sold 143,095 354,123 126,473 623,690
Gross Profit 290,525 718,977 256,778 1,266,280
Operating Expenses
Administration Costs 3 50,000 100,000 50,000 200,000
Marketing Costs 4 21,681 53,655 19,163 94,499
Utilities cost 5 18,409 42,993 16,898 78,299
Maintenance cost 6 48,026 114,579 43,493 206,097
Other operating expenses 7 75,000 150,000 75,000 300,000
Total Operating Expenses 213,115 461,227 204,553 878,895
Net Profit ($) 77,410 257,750 52,225 387,385

1 staff cost are estimated to be 18% of accommodation revenue

2 purchases are estimated to be 15% of accommodation revenue
3 marketing costs are estimated to be 5% of accommodation revenue
4 Administration costs of $200,000 are allocated based on floor space
5 utilities cost has an allocation of $30 per square metre floor space plus 3% of accommodation

revenue
6maintenance cost has an allocation of $50 per square metre floor space plus 9% of accommodation
revenue
7 Other operating expenses of $300,000 are allocated based on floor space
Required:

(a) Reconstruct the income statement using the contribution margin format, clearly show
separate columns for each room type and maintaining a total column.

(24 marks)

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

(3 marks)

(c) Calculate the weighted average contribution margin (WACM) per night stay of each room type
and total WACM.

(8 marks)

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

(6 marks)

(e) Calculate the margin of safety per room type.

(6 marks)

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

(9 marks)

[Total: 56 marks]