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 (39,025.8) (96,579) (34,492.5) (170,097.3)
Cost2
Total Variable (216,810.4) (536,550) (191,626) (944,986.4)
Cost
Contribution 216,809.6 536,550 191,624 944,983.6
Margin
Fixed Costs:
Administration (50,000) (100,000) (50,000) (200,000)
Costs
Utilities Cost3 (5,400) (10,800) (5,400) (21,600)
Maintenance (9,000) (18,000) (9,000) (36,000)
Cost4
Other Operating (75,000) (150,000) (75,000) (300,000)
Expenses
Total (139,400) (278,800) (139,400) (557,600)
Operating
Expenses
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 9 12 3 24
rooms
Bed 1 (Single) Bed 2 (Double) Bed 3 Total
(Penthouse)
Accommodatio 433,620 1,073,100 383,250 1,889,970
n Revenue
Total Variable (216,810.00) (536,550.00) (191,625.00) (944,985.00)
Cost
Contribution 216,810.00 536,550.00 191,625.00 944,985.00
Margin1
Calculate sales 22.94% 56.78% 20.28% 100.00%
mix (based on
accommodation
revenue)
Weighted 49,743.20 304,646.00 38,857.91 393,247.11
average
contribution
margin
(WACM) per
room2
Weighted
average
$1,077.39
contribution
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= 139400/110= 1267
Bed 2 = 278800/ 175= 1593
Bed 3 = 139400 / 350 = 398
Overall Breakeven
1267 + 1593 +398 = 3258
e) Calculate the margin of safety per room type.

In. Units

Bed 1 1971 – 1267 / 1971 = 35.72%

Bed 2 3066 – 1593 / 3066 = 47%
Bed 3 548 – 398 / 548 = 27.37%

(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 = 5.69
63% + 5.69 = 68.69%