Scribd
Upload
26 views

Final Practices Answer

The document contains a series of exercises analyzing the operations and profitability of various businesses, including a restaurant, hotel, and cinema. Each exercise includes calculations for average daily sales, monthly revenue, break-even analysis, and profit under different scenarios. The exercises demonstrate the impact of factors like seat turnover, occupancy rates, and variable costs on overall financial performance.

Uploaded by

mdilki650
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
26 views

Final Practices Answer

The document contains a series of exercises analyzing the operations and profitability of various businesses, including a restaurant, hotel, and cinema. Each exercise includes calculations for average daily sales, monthly revenue, break-even analysis, and profit under different scenarios. The exercises demonstrate the impact of factors like seat turnover, occupancy rates, and variable costs on overall financial performance.

Uploaded by

mdilki650
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

Exercise 1: Restaurant Operations Analysis

Problem Details:

A restaurant with 80 seats operates 7 days a week. The average price per customer is $25, and the
restaurant has a seat turnover of 2.5 times per day. Monthly fixed costs are $40,000, while variable
costs per customer amount to $10.
Solution:
1. Calculate the Average Daily Sales (ADS):
The number of customers per day is: Customers per day = Seats x Seat Turnover = 80 x 2.5 = 200

The ADS is then: ADS = Customers per day x Price per customer= 200 x 25 = 5,000 (USD/day)

2. Determine the Total Monthly Revenue:


Assuming the restaurant operates for 30 days in a month, the monthly revenue is:

Monthly Revenue = ADS x Days = 5000 x 30 = 150,000 (USD)

3. Calculate the Minimum Number of Customers to Break Even:


BEU = Fixed Costs/(USP-UVC) = ~ 2,667 (customers/month)

4. Analyze the Monthly Profit with Increased Turnover:


If the seat turnover increases to 3 times per day, the number of customers becomes:

Customers per month = Seats x Seat Turnover x Days = 80 x 3 x 30 = 7,200

The revenue is: Revenue = Customers per month x Price per customer = 7,200 x 25 = 180,000
(USD)

The variable costs are: VC = Customers per month x Variable Cost per customer = 7,200 x 10 =
72,000 (USD)

The profit is: Profit = Revenue - FC - VC = 180,000 - 40,000 - 72,000 = 68,000 (USD)

Exercise 2: Hotel Revenue and BreakEven Analysis

Problem Details:

A hotel with 50 rooms charges an average price of $120 per room per night. The hotel operates
with a 70% occupancy rate. Monthly fixed costs are $45,000, and variable costs per room are $40.

1. Calculate the Projected Monthly Revenue:


The number of rooms occupied per day is: Rooms per day = Total Rooms x Occupancy Rate = 50
x 0.7 = 35
The monthly revenue is: Revenue = Rooms per day x Price per room x Days = 35 x 120 x 30 =
126,000 (USD)

2. Determine the BreakEven Sales in Dollar Terms:


The break-even units (number of rooms occupied per month) are: BEU = Fixed Costs/(USP-UVC)
= 563 (rooms)

The break-even sales in dollar terms are: BE Sales = BEU x Price per room = 563 x 120 = 67,560
(USD)
3. Evaluate Profitability if Occupancy Drops to 60%:
The number of rooms occupied per day becomes: Rooms Sold per day = 50 x 0.6 = 30

Monthly revenue: Revenue = 30 x 120 x 30 = 108,000 (USD)

Variable costs: VC = 30 x 40 x 30 = 36,000 (USD)

Total costs: TC = FC + VC = 45,000 + 36,000 = 81,000 (USD)

Profit: Profit = Revenue - TC = 108,000 - 81,000 = 27,000 (USD)

Exercise 3: Pricing Strategy

A company observes the relationship between ticket price ( p ) and demand of quantity ( q ) as
follows:

q = 400 - 4p

1. Revenue Function:

R = p x q = p(400 - 4p) = 400p – 4p2

2. Price Maximizing Revenue:


Derivative:

R’(p) = 400 - 8p
R’(p) = 0 è p = 400/8 = 50

3. Profit at Optimal Price:

q = 400 - 4(50) = 200, R = 50 x 200 = 10,000, VC = 200 x 20 = 4,000

Profit = 10,000 - 10,000 - 4,000 = -4,000

Exercise 4: Seat Turnover and Budgeting


Problem Details:

A hotel with 120 rooms operates for 30 days per month. The average price per room is $150, and
the occupancy rate is 80%. Monthly fixed costs are $70,000, and variable costs per room are $50.

Solution:
1. Calculate Average Daily Sales (ADS):
The number of rooms occupied per day is:

Rooms Sold per day = Total Rooms x Occupancy Rate = 120 x 0.8 = 96

The ADS is: ADS = Rooms Sold per day x Price per room = 96 x 150 = 14,400 (USD/day)

2. Calculate the Total Monthly Revenue and Profit:


Monthly Revenue: Revenue = ADS x Operating Days = 14,400 x 30 = 432,000 (USD)

Variable Costs: VC = Rooms Sold per day x Variable Cost per room x Operating Days = 96 x 50
x 30 = 144,000 (USD)

Total Costs: TC = FC + VC = 70,000 + 144,000 = 214,000 (USD)

Profit: Profit = Revenue - TC = 432,000 - 214,000 = 218,000 (USD)

3. New Profit if Variable Costs Increase to $60 per Room:


New Variable Costs: VCnew = Rooms Sold per day x New Variable Cost per room x Operating
Days = 96 x 60 x 30 = 172,800 (USD)

New Total Costs: TCnew = Fixed Costs + VCnew = 70,000 + 172,800 = 242,800 (USD)

New Profit: Profitnew = Revenue} - TCnew = 432,000 - 242,800 = 189,200 (USD)

Exercise 5: Comprehensive Analysis

Problem Details:

A cinema with 200 seats operates for 30 days per month. The average ticket price is $15, with a
seat turnover of 2 times per day. Monthly fixed costs are $20,000, and variable costs per ticket are
$5.

Solution:
1. Calculate Average Daily Sales (ADS):
The number of tickets sold per day is: Tickets per day = Seats x Seat Turnover = 200 x 2 = 400

The ADS is: ADS = Tickets per day x Average Ticket Price = 400 x 15 = 6,000 (USD/day)
2. Determine Monthly Revenue and Profit:
Monthly Revenue: Revenue = ADS x Operating Days = 6,000 x 30 = 180,000 (USD)

Variable Costs: VC = Tickets per day x Variable Cost per ticket x Operating Days = 400 x 5 x 30
= 60,000 (USD)

Total Costs: TC = FC + VC = 20,000 + 60,000 = 80,000 (USD)

Profit: Profit = Revenue - TC = 180,000 - 80,000 = 100,000 (USD)

3. New Revenue and Profit with Increased Seat Turnover:


New Tickets per Day: Tickets per day (new) = Seats x New Seat Turnover = 200 x 2.5 = 500

New ADS: ADSnew = Tickets per day (new) x Average Ticket Price = 500 x 15 = 7,500 (USD/day)

New Monthly Revenue: Revenuenew = ADSnew x Operating Days = 7,500 x 30 = 225,000 (USD)

New Variable Costs: VCnew = Tickets per day (new) x Variable Cost per ticket x Operating Days
= 500 x 5 x 30 = 75,000 (USD)
New Total Costs: TCnew = FC + VCnew = 20,000 + 75,000 = 95,000 (USD)

New Profit: Profitnew = Revenuenew - TCnew = 225,000 - 95,000 = 130,000 (USD)

You might also like