Background Information Provided by Your Client: The Colorado Slope Side Hotel, i
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Background Information Provided by Your Client:
The Colorado Slope Side Hotel, is a resort hotel is in the Rocky Mountains. For the hotel, management expects occupancy rates to be 95 % in December, January, February and March; 85% in November and April; and 75% the rest of the year. This hotel has 355 rooms and the room rental is $250.00 per night. Of this, on average 10% is received as a deposit the month before the stay, 60% is received in the month of the stay, and 28% is collected the month after. The remaining 2% is never collected and assumed bad debt in the month after as a sales & general admin cost.
Most of the costs of running the hotel are fixed. The variable costs are only $45.00 per occupied room, per night. Fixed salaries (including benefits) run $420,000 per month, depreciation is estimated to be $400,000 a month, other fixed costs are $150,000 per month, and interest expense is $550,000 per month. Fixed, variable costs and salaries are paid in the month they are incurred, and interest is paid semi-annually each June and December. No new fixed assets are expected to be purchased during the year.
Financial statements should have proper heading, titles and format for the period they cover. You are making a presentation to a client. Summarize your answers & conclusions for each part in a textbox. The template is just an idea starter.
Project Part 1 (already completed):
The client wants your accounting firm to prepare a detailed and summarized monthly cash budget for the Slope Side hotel for the entire year. For simplicity, assume that there are 30 days in each month. Make sure you place proper headings and titles on your cash budget.
Assume the starting cash balance for January 1 is zero, build the monthly cash table at the bottom using zero as the start, add January activity to get January ending, aka February beginning balance.
Please place your answers in a text box for each part to summarize your answers. Also, your cells need to contain the Excel formulas to show your work.
Project Part 2 (already completed):
The client wants your accounting firm to prepare a traditional monthly income statement (profit and loss statement) using the information above in accrual method.
Take the monthly information and prepare an annual statement in accrual format.
Please place your answers in a text box for each part to summarize your answers. Also, your cells need to contain the Excel formulas to show your work.
Continue to use the template from your budget, create a 2nd tab labeled Income Statement
Project Part 3:
An avalanche occurs just before Martin Luther King weekend and buries more than half the lodge where the rooms are located. It is not expected to cleaned up until after Presidents Day, two very big booking weekends. Bookings for January and February are reduced to 25%.
The client needs to know: How much would the hotel’s annual net profit decrease if occupancy decreased to 25% during the peak season (that is from 95% to 25%) in each month January and February.
The client wants to know the contribution margin per room at each occupancy level.
The client wants to know the annual breakeven point of rooms required to be occupied at the hotel annually.
Convert your part 1 Excel cash flow model with the new assumptions, then
Write a brief narrative will the client be able to pay all of their expenses and interest? If not why, if yes, why?
Please label your work Part 3.1, Part 3.2, Part 3.3, etc and at the end write a brief narrative (3-4 sentences) what you might advise your client to look into or do.
For Part B above – Please use the Excel sheet you have used for the other 2 parts (weeks) of the project. You can use the Week 6 template for your part 3 work, since this the production of a second traditional budget with different data. Copy your week 6 budget and change only the indicated data. I suggest stacking the incomes statements, week 6 on top with week 7 below.
Then you indicate in a text box the net income difference in text box.
Don’t forget to compute your contribution margin and break-even point. (parts 3 & 4 above) Please place your answers in a text box for each part to summarize your answers. Also, your cells need to contain the Excel formulas to show your work.
Lastly, copy your project Part 1 (week 5) cash flow into a 4th tab on your Excel spreadsheet and answer part 5 above.
