Reference no: EM132769761
You have been asked to help prepare the operating budget for a proposed new 100-room motel, with a 65-seat coffee shop, 75-seat dining room, and 90-seat cocktail lounge. The operating budget for the first year will be based on the following information:
Rooms Department: Occupancy is 64% with an average room rate of $72. Fixed wages for bellpeople, front-office employees, and other personnel attached to the rooms department are estimated at $326,900. In addition, for every 16 rooms occupied each day, one housekeeper will be required for an eight-hour shift at a rate of $8.50 an hour. Staff fringe benefits will be 12% of total wages. Linen and laundry costs will be 6% of total rooms sales revenue. Supplies and other items will be 3% of total rooms sales revenue.
Food Department: The dining room is open 6 days a week, 52 weeks a year for lunch and dinner only. Lunch seat turnover is 1.5, with an average food check of $8.25. Dinner seat turnover is 1.0, with an average food check of $14.00.
The coffee shop is open 7 days a week for all meal periods. Breakfast seat turnover is 1.0, with an average food check of $5.75. Lunch seat turnover is 1.5 with an average food check of $7.75. Dinner seat turnover is 1.0, with a $9.95 average food check. Coffee shop seat turnover for coffee breaks and snacks is 6.0, with an average check of $1.75.
- The cocktail lounge serves an estimated 20 food orders per day, with an $8.50 average check. The lounge is closed on Sundays and certain holidays and only operates for 310 days during the year.
Total payroll costs, including fringe benefits in the food department, will be 45% of total food sales revenue. Other costs, variable as a per- centage of total food sales revenue, follow:
Food cost 35%
Laundry and linen 2%
Supplies 5%
Other costs 2%
Beverage Department (310 operating days a year): Each seat in the cock- tail lounge is expected to generate $5,250 per year. In addition, the lounge will be credited with any alcoholic beverages served in the coffee shop and dining room. In the coffee shop, beverage sales revenue is estimated to be 15% of combined lunch and dinner food sales revenue, and in the dining room 25% of combined lunch and dinner food sales revenue.
The beverage department operating costs are as follows:
- Liquor cost is 32% of total beverage sales revenue.
- Payroll and fringe benefits are 25% of total beverage sales revenue.
- Supplies and other operating costs are 5% of total beverage sales revenue.
Problem 1: From the preceding information, prepare contributory income statements for the first year of operations for each of the three departments. Then combine departmental contributory incomes in a combined departmental operating budget format showing a combined total contributory figure, and deduct the following undistributed, indirect costs to arrive at a budgeted income before depreciation, interest, and income tax. (In this problem, round all final numbers to the nearest dollar.)
Administrative and general $156,800
Marketing 147,600
Utilities costs 58,900
Property operation & maintenance 52,400
Insurance 15,300
Property taxes 82,100