Reference no: EM132601684

Question - A hotel operation has 120 rooms and a 100-seat restaurant. Please make a pro forma income statement for the next year to determine the forecasted net income.

Rooms department: In the previous year of operations the occupancy rate was 70% and the average room rate was $48. The GM is forecasting the occupancy rate to increase by 5% and the average room rate is to be increased by $4. Cost of sales per room occupied is forecasted to be $8 per room. Department fixed operating expenses is estimated to be $250,000.

Restaurant department: In the previous year the average check was $18, with an average seat turnover of 1.75. The GM is forecasting the average check to increase by $2 and seat turnover to remain the same. Costs of food and beverage and other variable operating expenses are expected to be 35% and 20% of revenue respectively. The fixed operating expenses is estimated to be $261,000 per year. The restaurant opens 300 days a year.

Company-wide undistributed expenses & fixed charges:

The indirect operating expenses and fixed charges were $300,000 and $350,000, respectively in the previous year. GM expect the indirect costs to increase by the same rate of inflation at 3.5% and no changes for fixed charges.

The tax rate is expected to be 35%.

Required -

1. Estimate Rooms department's revenue and direct costs.

2. Estimate Restaurant department's revenue and direct costs.

3. Find the net income of the whole company.