Hotel is a hospitality organization of tourism activities for eating and lodging.
The main purpose of hotel is to provide lodging.
It also provides food and beverage to the guests who are economically, mentally and physically able to receive.
Customers are called guests in hotel industries.
Foods are depending on nature of market price.
Fooding and lodging are two separate services.
So, separate calculations are necessary for these two services.
Other method for calculation of total operating cost is fixed cost and variable cost.
The number of room available is calculated on different basis like hotel size, location, level of service, facilities target market etc.
Room rent may be different during season and off-season.
Statement of Operating Cost
XYZ Hotel
Particulars |
Amount $ |
Fixed costs: |
|
Staff salary |
xxxx |
Repairs and renewable |
xxxx |
Interior decoration |
xxxx |
Laundry contract cost |
xxxx |
Insurance |
xxxx |
Other office/administrative expenses |
xxxx |
Sundry fixed cost |
xxxx |
Depreciation on fixed assets |
xxxx |
Other fixed expenses etc |
xxxx |
Total A |
xxxxx |
Variable costs: |
|
Lighting charge |
xxxx |
Power, heating and coal |
xxxx |
Attendant’s salary |
xxxx |
Linen purchase (clothes) |
xxxx |
Purchase of food materials |
xxxx |
Other variable expenses etc |
xxxx |
Total B |
xxxxx |
Total operating cost |
xxxxx |
Room rent per day per guest = Total operating cost ÷ Total room days |
|
Profit on cost = Total cost x % ÷ 100
Profit on revenue = Total cost x % ÷ (100 – %)
XYZ Hotel
(For per week or day, per person)
Particulars |
Amount weekly |
Amount per day |
Food cost per person, per day: |
|
|
Break fast |
|
xxx |
Lunch |
|
xxx |
Dinner |
|
xxx |
Total A |
|
xxx |
Food cost to staff, per day or week: |
|
|
Restaurant service |
xxx |
|
Housekeeping service |
xxx |
|
Front office expenses |
xxx |
|
General service |
xxx |
|
Total B |
xxx |
|
Direct expenses, per day or week: |
|
|
House keeping |
xxx |
|
Restaurant |
xxx |
|
Front office |
xxx |
|
Total C |
xxx |
|
Indirect expenses, per day or week: |
|
|
Indirect expenses for restaurant |
xxx |
|
Indirect expenses for house keeping |
xxx |
|
Indirect expenses for front office |
xxx |
|
Indirect expenses for general service |
xxx |
|
Total D |
xxx |
xxx |
Total cost per day or week, per person (A+B+C+D) |
|
xxxx |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2A
Following information is given by Nirvana Hotel, a leading two star hotel:
Permanent staff salaries |
$12,00,000 per annum. |
Room attendance salary |
$100 per day |
Lighting, heating and power |
$1,50,000 per annum average |
Repairs to building |
$1,50,000 per annum |
Linen |
$2,38,480 per annum average |
Sundries fixed expenses |
$90,000 per annum |
Interior decoration |
$250,000 per annum |
Depreciation on building |
$1,00,000 per annum |
Depreciation on equipment |
$1,50,000 per annum |
Additional information:
The salary is paid room attendant on daily basis. There is one room attendant for one room.
Assume that period of the season and off-season is 6 months each.
There are 80 rooms in the hotel and 75% of the rooms are normally occupied in season and 30% occupied in off-season.
Normal days in a month may be assumed to be 30.
Profit margin is targeted at 50% of the total cost.
Required: (1) Statement of operating cost showing fixed cost and variable cost; (2) Total room days;
(3) Cost of room rent per day per guest; (4) Average charge to guest if profit 90% on service revenue
[Answer: (1) $19,40,000 + 19,00,480 = 38,40,480;
(2) 15,120 room days; (3) $254; (4) $2,286]
SOLUTION:
Given and working note:
Attendants’ salary: |
|
Season = $100 x 80 rooms@75% x 30 days x 6 months |
= 10,80,000 |
Off season = $100 x 80 rooms@30% x 30 days x 6 months |
= 4,32,000 |
Total salary |
= $15,12,000 |
Statement of Operating Cost
Nirvana Hotel
(For one year)
Particulars |
Amount |
Fixed cost: |
|
Staff salary |
12,00,000 |
Repairs to building |
1,50,000 |
Sundries fixed expenses |
90,000 |
Interior decoration |
2,50,000 |
Depreciation on building |
1,00,000 |
Depreciation on equipment |
1,50,000 |
Total A |
19,40,000 |
Variable cost: |
|
Room attendant’s salary |
15,12,000 |
Lighting, heating and power |
1,50,000 |
Linen |
2,38,480 |
Total B |
19,00,480 |
Total operating cost (TOC) |
38,40,480 |
Cost of room rent per day per guest [Total operating cost ÷ Total room days viz $38,40,480 ÷ 15,120] |
254 |
Charge to guest [254 x 90 ÷ (100 – 90) |
2,286 |
Total room days
Season = 80 rooms @ 75% x 30 days x 6 months |
10,800 |
|
Off season = 80 rooms @ 30% x 30 days x 6 months |
4,320 |
|
Total room days |
15,120 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2B
City View Hotel has 30 bedrooms with a maximum sleeper nights of 210 per week average 70% occupancy remains throughout the year. The average food cost per person per day comes to as follows:
Breakfast $54
Lunch $150
Dinner $200
Weekly food cost to staff and wages for following services comes to as under:
Restaurant service $14,200
Housekeeping service $9,500
General service $7,300
Annual direct expenses for:
Housekeeping $182,000
Restaurant $109,200
Additional information:
(a) One year is equal to 52 weeks.
(b) Indirect expenses of $260,000 to be apportioned to restaurant, housekeeping and general service in the ratio of 3:4:3
(c) General service cost is to be apportioned to restaurant and housekeeping in the ratio of 5:3
Required: (1) Total cost per day per guest; (2) Charge to guest if 90% profit on cost
[Answer: (1) $682.99; (2) $1,297.68]
SOLUTION:
Operating Cost Sheet
City View Hotel, Pokhara
Per day, per guest
Particulars |
Restaurant |
Housekeeping |
General service |
Weekly food cost to staff and wages |
14,200 |
9,500 |
7,300 |
Direct expenses: |
|
|
|
Housekeeping ($182,000 ÷ 52) |
– |
3500 |
– |
Restaurant ($109,200 ÷ 52) |
2,100 |
– |
– |
Indirect expenses ($260,000 ÷ 52 in 3 : 4 : 3) |
1,500 |
2,000 |
1,500 |
Total before adjustment |
17,800 |
15,000 |
8,800 |
General service apportioned in 5:3 |
5,500 |
3,300 |
(8,800) |
Total after adjustment |
23,300 |
18,300 |
Nil |
Cost per person per day (Total ÷ 210 beds @70%) |
158.50 |
124.49 |
Nil |
Again,
Total cost per guest per day |
|
Charge to guest |
|
|
Restaurant |
158.50 |
|
Cost per guest per day |
682.99 |
Housekeeping |
120.49 |
|
Add: Profit [682.99 @ 90% of cost] |
614.69 |
Breakfast |
54.00 |
|
|
$1,297.68 |
Lunch |
150.00 |
|
|
|
Dinner |
200.00 |
|
|
|
Total |
$682.99 |
|
|
|
Note:
210 sleeper night = 30 beds x 7 days a week.
So, no entry for 30 beds
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Journal Entry and Ledger |
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Ledger |
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Trial Balance and Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2061 Modified
Hillside Hotel has 15 bedrooms with a maximum sleeper nights of 164 per week. Being a well viewed Hotel, an average 75% occupancy remains throughout the year. The average food cost per person per day comes to as follows:
Breakfast $18.20
Lunch $33.00
Dinner $40.80
Weekly food cost to staff and wages for following services comes to as under:
Restaurant service $1,420
Housekeeping service $950
General service $730
Annual direct expenses for:
Housekeeping $18,200
Restaurant $10,920
Indirect expenses of $26,000 to be apportioned to restaurant, housekeeping and general service in the ratio of 3:4:3.
General service cost is to be apportioned to restaurant and housekeeping in the ratio of 5:3.
Required: (a) Cost per person per day of restaurant and housekeeping; (b) Total cost per day per person
[Answer: Restaurant = $18.94; Housekeeping = $14.88;
Total cost per person per day = $125.82;
*General expenses $880 x 5:3 = 550 and 330;
SOLUTION
Operating Cost Sheet
Hillside Hotel
(Per day, per person)
Particulars |
Total |
Restaurant |
House keeping |
General service |
Weekly food cost to staff and wages |
3,100 |
1,420 |
950 |
730 |
Direct expenses: |
|
|
|
|
Housekeeping (18,200 ÷52) |
350 |
– |
350 |
– |
Restaurant (10,920÷ 52) |
210 |
210 |
– |
– |
Indirect expenses (26,000 ÷ 52 in 3:4:3) |
500 |
150 |
200 |
150 |
Total before adjustment |
4,160 |
1,780 |
1,500 |
880 |
Expenses of general service transfer in 5:3 |
Nil |
550 |
330 |
(880) |
Total after adjustment |
4,160 |
2,330 |
1,830 |
Nil |
Cost per person per day (total ÷ 164 beds @75%) |
|
18.94 |
14.88 |
Nil |
Therefore, total cost per person per day:
Restaurant |
18.94 |
Housekeeping |
14.88 |
Breakfast |
18.20 |
Lunch |
33.00 |
Dinner |
40.80 |
Total |
$125.82 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2064 Modified
AM Lodging Home is being run in a small hill station with 60 single rooms 90% of rooms are generally occupied in summer and 50% in winter. The period of summer and winter may be considered to be 30 weeks and 22 weeks respectively. The profit margin is targeted at 50% of the room rent.
The cost estimation and other details for the year ending are:
|
Amount |
|
Amount |
Staff salaries |
800,000 |
Repair and maintenance |
70,000 |
Lighting and heating |
200,000 |
Insurance |
30,000 |
Interior decoration and others |
80,000 |
Other variable expenses |
71,800 |
The fixed assets of lodging home are as under:
Building $20,00,000
Furniture $10,00,000
Equipment $5,00,000
Annual depreciation: Building 5%; Furniture and equipment 10%
Required: (1) Total room days; (2) Operating cost statement showing fixed, variable and total cost.
(3) Profit and total cost; (4) Room charge per day per guest
[Answers: (1) Total room days = 15,960;
(2) Fixed = $12,30,000; Variable = 2,71,800; Total = $15,01,800;
Profit = $15,01,800; Total cost = $30,03,600;
(3) Room charge = $188.20 per day per guest;
SOLUTION:
Given and working note:
Depreciation:
On building 100,000
On furniture 100,000
On equipment +50,000
Total 250,000
Total room days
in summer |
= 60 rooms @ 90% x 30 weeks x 7 days |
11,340 |
In winter |
= 60 rooms @ 50% x 22 weeks x 7 days |
+ 4,620 |
|
|
15,960 |
Operating Cost Sheet
AM Lodging Home
(For 12 months)
Particulars |
Amount $ |
Standing/fixed charges: |
|
Staff salaries |
8,00,000 |
Interior decoration and other |
80,000 |
Repairs and maintenance |
70,000 |
Insurance |
30,000 |
Depreciation |
2,50,000 |
Total A |
12,30,000 |
Running/variable charges: |
|
Lighting and heating |
2,00,000 |
Other variable expenses |
71,800 |
Total B |
2,71,800 |
Total charges (A+B) |
15,01,800 |
Add: Profit (1501,800 x 50 ÷ (100– 50) |
15,01,800 |
Total cost |
$30,03,600 |
Total room days |
15,960 |
Room charge per day per guest = Total room charge ÷ Total room days |
$188.20 |
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#####
Problems and Answers of Hotel Costing |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2A
Wildlife Safari Resorts has following data:
Food provision per guest per day (related to food and beverage):
Breakfast $90
Lunch $250
Dinner $300
Indirect expenses $9, 00,000 apportioned on the basis of floor area occupied.
Annual expenses are:
Departments |
Wages and salaries |
Sundry expenses |
|
Food and beverage |
4,00,000 |
8,00,000 |
|
Front office |
3,00,000 |
4,00,000 |
|
House keeping |
2,50,000 |
1,22,000 |
|
Floor area occupied by three departments:
Food and beverage (F&B) 3,000 square feet
Front office (FO) 4,000 square feet
Housekeeping (HK) 2,000 square feet
Additional information:
(a) Administrative cost is apportioned on the basis of total departments cost.
(b) There are 40 rooms in the resorts and 80% of the rooms are normally occupied for 8 months and 20% for 4 months.
(c) Normal days in a month may be assumed to be 30 days.
(d) Profit margin: 25% on billing amount.
Required: (1) Cost statement showing food and beverage and housekeeping; (2) Total cost per guest per day;
(3) Charge to guest if 50% profit on cost
[Answer: food and beverage = $211.81; Housekeeping = $155.32;
Total cost = $1,007.12; Profit = $503.56; Charge = $1,510.68]
*Number of room days (7,680 + 960) = 8,640
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 2B
Hotel Nuwakot (P) Ltd has following information for 31st December:
Annual expenses summary:
Staff salaries: |
Front office @ $30,000 per month |
|
|
Housekeeping @ $35,000 per month |
|
|
Food and beverage @ $20,000 per month each |
|
|
Kitchen department @ $15,000 per month each |
|
|
||
Lighting and heating |
$100,000 per annum |
|
Interior decoration and garden keeping |
$150,000 |
|
Repairs and maintenance |
$90,000 |
|
Depreciation on building |
5% of $12,00,000 |
|
Depreciation on furniture and equipment |
10% of $9,00,000 |
|
Miscellaneous expenses |
$2,00,000 |
|
Insurance |
$40,000 |
|
Occupancy ratio:
30 single room: for 200 days 100% and 165 days 60%: |
20 double rooms: for 200 days 90% and 165 days 40% |
For the purpose of rent fix:
1.5 times of the single room is taken for double room only for rent not for room days
Profit margin:
60% on revenue
Required: (1) Total room days; (2) Total operating cost; (3) Total profit; (4) Room rent for single room;
(5) Room rent for double room
[Answer: (1) 13,890 days; (2) $19,30,000; (3) $28,95,000;
(4) $347.37; (5) $521.10; *Room days (8,970 + 4,920) = $13,890]
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