The Rocky Mountain Hotel, is a resort hotel is in Crested Butte, Colorado.

Wilmington University Financial Statement Project

The Rocky Mountain Hotel, is a resort hotel is in Crested Butte, Colorado. For the hotel, management expects occupancy rates to be 95% in December, January, February and March; 85% in November and April; and 70% the rest of the year. This hotel has 325 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 $40.00 per occupied room, per night. Fixed salaries (including benefits) run $400,000 per month, depreciation is estimated to be $360,000 a month, other fixed costs are $165,000 per month, and interest expense is $550,000 per month. Fixed, variable costs and salaries are paid in the month they are incurred, depreciation is only recorded at the end of each quarter and interest is paid semi-annually each June and December.

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 3:

The client wants to know: How much would the hotel’s annual net profit increase if occupancy increased by 5 percentage points during the off season (that is from 70% to 75%) in each month from May to October.

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 at each occupancy level.

Part A asks, what is the change in profit (net income) with the change in occupancy rates. That is why on Sunday announcement I suggested you stack your income statements.

Part 2 income statement on the top and this weeks part A just below it. Last week I penalized you if you didn’t have proper titles, please fix statements for this week and under your 2nd income statement you should have a text box for your assumptions, basically that you changed the occupancy rates from May to October as the problem states. From the 2nd income statements your answer to part A will be viewable, but make sure you answer it in the text box after you state the assumptions.

Part B asks for the contribution margin, that is measured per room, per night, not annually. It is asking how does it change with the new occupancy rates.

Part C is asking to calculate for the client what the number of rooms need to be occupied during the year to breakeven

Dec Room Nights Occupancy Occupied Rooms Average Rate Revenue Variable room costs Bad Debt expense per month Fixed Salaries and Benefits Fixed Operating Costs Interest Depreciation Net Income Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Jan

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