# Hotel Budget Problems Exercise 1

There are two budget problems to complete. The first is to calculate amounts to use in budgeting based on actual information and formulas.

The second is to prepare an annual budget based on that information. Following is information for the Rooms Department for the 600 room Flagstaff Hotel for the first six periods of the year:

Room Revenue \$8,713,000
Transient Rooms Sold 83,730
Group Rooms Sold 16,270
Total Rooms Sold 100,000

Operating Expenses

Linen \$ 31,100
Cleaning Supplies 24,000
Guest Supplies 104,800
Outside Services 24,000
Laundry 80,500
Concierge Expense 60,000
Office Supplies 19,200

Reservation Expense

Reservation Department \$150,000
Fixed Reservation Center Cost 180,000
Variable Reservation Center Cost 251,400
Total Reservation Expense 581,400

All Other Expense 120,000
Total Operating Expenses \$1,045,000
Total Operating Expenses Percentage 12.0%

#### Budget Problem 1

Use the following formulas to calculate each one of the line items. They will be used to prepare the annual budget for next year. Round the average cost per period to whole dollars, round the cost per occupied room to whole cents, and round the percentage of sales to four decimals. Use the laundry and reservation information as supplied.

1. Linen—Calculate the average cost per period.
2. Cleaning Supplies—Calculate the average cost per occupied room.
3. Guest Supplies—Calculate the average cost per occupied room.
4. Outside Services—Calculate the average cost per period.
5. Laundry—Calculate at 70% of total laundry department expense per period; laundry department expense at \$115,000 for six periods.
6. Concierge Level Expense—Calculate as a percentage of total room sales.
7. Office Supplies—Calculate as a percentage of total room sales.
8. Reservation Cost

a. Reservation department cost at \$25,000 per period.
b. Fixed expense at \$50 per total number of rooms in hotel per period.
c. Variable expense at \$6 per reservation. Calculate the reservations as 50% for transient rooms sold.

1. All other expense at \$20,000 per period.

Use the following formulas to calculate each one of the line items: They will be used to prepare the annual budget for next year. Round the average cost per period to whole dollars, round the cost per occupied room to whole cents, and round the percentage of sales to four decimals. Use the laundry and reservation information as supplied.

1. Linen—Calculate the average cost per period: \$5,183 per period
2. Cleaning Supplies—Calculate the average cost per occupied room: \$0.24 per occupied room
3. Guest Supplies—Calculate the average cost per occupied room: \$1.05 per occupied room
4. Outside Services—Calculate the average cost per period: \$2,000 per period
5. Laundry—Calculate at 70% of total laundry department expense per period; laundry department expense at \$115,000 for six periods:
\$13,416 or \$115,000 ¥ 70%/6 periods
6. Concierge Level Expense—Calculate as a percentage of total room sales: 0.69% of sales
7. Office Supplies—Calculate as a percentage of total room sales: 0.22% of sales
8. Reservation Cost per period:

a. Reservation department cost at \$25,000 per period: \$25,000 per period
b. Fixed expense at \$50 per total number of rooms in hotel per period: \$30,000 or 600 rooms ¥ \$50
c. Variable expense at \$6 per reservation. Calculate the reservations as 50% of transient rooms sold: \$251,190 or 83,730 ¥ 50% ¥ \$6

1. All other expense at \$20,000 per period: \$20,000 per period