A hotel having 20 single rooms is having 80% occupancy in normal season (8 months) and 50% in off- season (4 months) in a year (take 30 days month).…

CA Intermediate · Cost and Management Accounting · MTP · May 2024
A hotel having 20 single rooms is having 80% occupancy in normal season (8 months) and 50% in off- season (4 months) in a year (take 30 days month). Annual fixed expenses Amount in ₹ Salary of the staff (excluding room attendant) 15,00,000 Repair & maintenance 12,60,000 Depreciation on building & furniture 12,40,000 Other fixed expenses like dusting, sweeping etc. 13,25,000 53,25,000 Variable expenses (per guest per day) Linen, laundry & security support 80.00 Electricity & other facilities 120.00 Misc. expenses like attendant etc. 300.00 500.00 Management wishes to make a margin of 25% of total cost. Required CALCULATE the Tariff per room per day.CALCULATE the break-even occupancy in normal season (in percentage also) assuming there is 50% occupancy in off-season.

Suggested Answer and Working Notes:

Workings: Total occupancy = Occupancy in normal season + Occupancy in off-season = (20 rooms × 80% × 8 months × 30 days) + (20 rooms × 50% × 4 months × 30 days) = 3,840 + 1,200 = 5,040 room-days Total Cost = Variable cost + Fixed cost = (₹ 500 × 5,040 room-days) +53,25,000 = 25,20,000 +53,25,000 = 78,45,000 (a) Calculation of tariff rate per room Tariff per room per day = (Total cost + 25% Margin on total cost) ÷ Total occupancy = (₹ 78,45,000 + 19,61,250) ÷ 5,040 = 1,945.68 (b) Calculation of break-even occupancy Contribution per day = Tariff – Variable cost = 1,945.68 – 500 = 1445.68 Break-even occupancy = 53,25,000 ÷ 1445.68 = 3683 Occupancy in normal season = Break-even occupancy – Occupancy in off-season = 3683 – (20 rooms × 50% × 4 months × 30 days) = 3683 – 1200 = 2483 room-days In Percentage = 2483 ÷ 4800 = 51.73%

Topics: Service Costing

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