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Gordan Galaxy Hotel has conducted trend analyses for the last 5 years for the preparation of the budget for the year 2021. It has been observed that the average occupancy during the off-season i.e. November to April remains below 60%.
Revenue Contribution from 3 profit centres: Accommodation: 50%, Restaurant: 30%, Theatre 20% The three Profit centres have the following pattern of Contribution %:ACCOMMODATION
Revenue 100
Wages 25
Direct cost 15
Contribution 60RESTAURANT
Revenue 100
Wages 20
Direct cost 50
Contribution 30THEATRE
Revenue 100
Wages 15
Direct cost 45
Contribution 40Estimated Revenue for the current year is Rs. 60 Million and the Fixed cost is Rs. 10 Million
To improve the return on capital employed (ROCE) of Rs. 110 million, the following two suggestions have been made:Option 1. An offer of two nights reduced price at Rs. 16,000 during the off-season (November to April). It is expected that occupants under this offer will spend 30% of the accommodation charge in the restaurant and 15% in the theatre.
Option 2. To increase restaurant and theatre prices by 15% and also increase the room rent (assuming that there will be no change in occupancy).
Calculate the expected return on capital employed under the budget before tax:
Please do not simply type out a full question and expect to be provided with a full answer.
Unless you have been given this as an assignment (in which case you are surely not expecting us to do your homework for you), you must have an answer in the same book in which you found the question. So ask about whatever it is in the answer that you are not clear about and then I will explain.
You can find everything needed to be able to answer this question in our free lectures. The lectures are a complete free course for the paper and cover everything needed to be able to pass the exam well.
Hello,
I hope you’re doing well. I just wanted to clarify that this isn’t a homework assignment. It’s actually related to some topics I received from a friend who has a different professional qualification. I’m using it as practice because I find it helpful for my learning journey. While I’ve already attempted to answer the question, my friend doesn’t have the solution, so I thought it would be beneficial to get some feedback and ensure I’m on the right track.
Send me your answer and I will attempt to go through it and give you some feedback.
Existing ROCE = 16.55%
Option 1
OFF SEASONS (after changes)
Accommodation = (6000/180)-(16000/2)*180 = 4560
Restaurant = 3600 + (4560 * 30%) = 19368
Theatre = 2400 + (4560 * 15%) = 3084
SEASONS (Same as before)
Accommodation = 24000
Restaurant = 14400
Theatre =9600
ROCE = 16.38%Option 2
ROCE = 20.32%This looks good
However we cant give you any more feedback without seeing the real question and answer
Knowing which syllabus it is aimed at.
Which book it is taken from.Thanks for your feedback!
I appreciate your response. However, I’m not sure which book this question is from or what syllabus it’s aimed at. The question only mentions ROCE and ROI as the topic without providing any additional information. That’s why I reached out here, hoping to get some guidance in case I’ve missed any details or made any mistakes in the question.
As I have said because you are asking about a question that we have never seen before, or tried and tested. It might not be fit for purpose, it may be the wrong difficulty level, it may not be ACCA exam standard…I could go on!
This is an UNADViSABLE way to study for the PM exam.
You should be using actual past exam questions, and those published in a kit from BPP or Kaplan.
Which are the correct standard, have been agreed by the examining body etc
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