1. Required
Prepare a schedule showing CrownJewel’s projected cash receipts in October,
November and December.
The marketing department of Singapore’s CrownJewel Hotel has projected the
following sales in the last half of the current financial year.
CrownJewel projected sales (in $000)
July August September October November December
Rooms 630 660 600 540 500 600
Restaurant & Bar 90 100 80 70 60 80
Most of CrownJewel’s room sales are made to corporate clients. Past experience
indicates that 10% of room sales are for cash, 50% is collected in the month following
the sale, 35% is collected two months following the sale and 5% of sales are to a
large company that takes three months to settle accounts.
In the past, 30% of restaurant and bar sales have been for cash and 70% have
been charged and collected in the month following the sale.
2. Required
Prepare a schedule showing CrownJewel’s projected cash disbursements for
October, November and December.
In connection with the CrownJewel sales estimates provided in Problem 1,
experience has shown that room variable costs are 20% of room revenue. Sixty per
cent of these variable costs are paid for in the month the expense is incurred and the
remainder is paid for in the following month.
Restaurant and bar variable costs comprise wages, food and drink. Wages are
10% of restaurant and bar revenue and are paid for in the month incurred. The cost
of food and drink is 15% of restaurant and bar revenue. Due to the CrownJewel’s
inventory stocking policy, 40% of food and drink is purchased one month before it is
sold. The remainder is purchased in the month of sale. All food and drink is purchased
from the same company which extends one-month trade credit.
The hotel has fixed costs of $15,000 per month which are paid for in the month
incurred. In addition, the hotel estimates it will make a quarterly electricity payment of
$3,000 in November and its annual insurance premium of $7,500 is due for payment
in December.
3. Draw on your solutions provided to Problems 1 and 2 to prepare CrownJewel’s
cash budget for October, November and December. It has been estimated that the
hotel will have a positive cash balance of $12,000 on 30 September.
4. Required
Prepare a cash budget showing receipts, disbursements and opening and closing
cash balances for each of the first three months of 20X2.
The ShireLodge provides a residential convention service in England’s Yorkshire
Dales. The lodge’s general manager is concerned about cash flow in the next few
months particularly as insurance will soon be due for payment.
The following revenue and expense estimates have been developed for the first
four months of 20X2:
Attachment 2285
It has been estimated that sales in December 20X1 will be £8,000. Previous cash
collections indicate that 10% of all sales are collected in the month prior to the sale
as a deposit. Fifty per cent of all sales are collected in the month of the sale, and 40%
of sales are collected in the month following the sale.
Variable costs are 15% of revenue. Ninety per cent of variable costs are paid in the
month of the sale to which they relate, and the remainder are paid in the month prior
to the sale (purchase of some food and other items in preparation for conventions).
Salary and ground maintenance fixed costs are paid for as they are incurred.
Insurance is paid for twice a year, in January and July. It is estimated that on 1
January 20X2 the lodge will have £4,200 in its bank account.
5. Required
(a) Using the year-end account balance, evaluate the effectiveness of the hotel’s
accounts receivable collection system.
(b) If the hotel’s peak season runs from November through to January, how does this
additional information affect your answer to part (a)?
(c) Prepare an ageing of accounts receivable schedule in order to obtain additional
insight into the status of the hotel’s accounts receivable balance. What further
observations can be made from the ageing schedule?
A review of the accounts receivable records of Auckland’s CreatureComforts Hotel
reveals the following year-end information.
Attachment 2286
The credit manager believes that the report accurately shows the proportion of the
year-end accounts receivable balance that can be traced to months in which credit
sales were made. Forty per cent of the hotel’s $6,000,000 annual sales are on credit.
The hotel extends 30-day credit terms.
6. Required
What is the TartanDays’ EOQ for laundry detergent?
The laundry department of the Edinburgh hotel, TartanDays, orders concentrated
laundry detergent in 10-kilogram boxes. Each box costs £32. It costs £20 to place,
process and receive a laundry detergent order and TartanDays has estimated that it
would cost £2 to hold a box of detergent in inventory for a year. The hotel uses 25
boxes of detergent per month.
7. Required
(a) What is the Roma’s EOQ for cheese? Assume 52 weeks in a year.
(b) What is the sum of Roma’s current cheese carrying and ordering costs? Assume 52 weeks in a year.
(c) What would Roma save in total carrying and ordering costs if it changed its order
size to the most economic order quantity (EOQ)?
Toronto’s Roma Pizzeria sells a variety of pizzas. The largest inventory item held by
Roma is cheese. The owner has approached you for advice in connection with the
size of orders that should be placed when ordering cheese. You have ascertained the
following:
- Cheese is ordered in blocks at $20 per block.
- Roma currently places an order with its cheese supplier every two weeks and the
average order size is 500 blocks. Roma has a policy of timing its cheese reordering
so that its inventory of cheese has declined to 40 blocks when the new shipment
arrives.
- Money not invested in inventory could be invested in a bank account to earn Roma
5% per annum.
- The cheese is shipped in refrigerated transport and the cost of ordering, shipping
and receiving a shipment is $30.
8. Required
Conduct an analysis to demonstrate whether the MouthWatering Restaurant should
take the trade discount offered.
Johannesburg’s ‘MouthWatering’ Restaurant has approached you for assistance in
determining whether it should take the 1/10 net 30 trade discount terms offered by its
main food supplier. The restaurant currently has invested excess liquidity in
marketable securities earning an 8% average annual rate of return.
9. Required
Conduct an analysis to demonstrate whether Feast’N’Run should take the trade
discount offered.
Feast’N’Run provides a contract catering service to several university and college
campuses. One of its main suppliers has offered trade discount terms of 1/10 net 40.
In the past, Feast’N’Run has taken an average of 50 days’ credit when settling its
trade accounts. The chief accountant feels that this policy has not damaged relations
with any of its suppliers and proposes to continue with it, except when making an
early payment to secure a discount. Feast’N’Run finances its investment in working
capital by short-term borrowing that carries an annual interest rate of 9.5%.
10. Required
(a) If SlopeVerticale’s long-term financing is A1,000,000:
1 Based on the asset projections provided, determine the floating short-term
bank loan required in each month of the year.
2 Determine SlopeVerticale’s total financing cost for the year.
(b) If SlopeVerticale’s long-term financing is A1,020,000:
1 Determine the floating short-term bank loan required in each month of the year.
2 Determine SlopeVerticale’s total financing cost for the year.
(c) What are the profit/risk trade-offs associated with the different financing options identified in parts (a) and (b)?
Le SlopeVerticale is a French skiing hotel complex offering accommodation,
restaurant, bar, ski shop and equipment hire facilities. The complex has estimated it
will have the following assets for the forthcoming year:
Attachment 2287
With respect to the cost of financing these assets, no interest is paid on the balance
of trade accounts payable or accrued wages, which fluctuate through the year. At any
time, the aggregate of these two accounts is generally 60% of current assets. The
remainder of SlopeVerticale’s investment in assets is financed by:
- Long-term financing costing an average of 10% per annum
- A floating short-term bank loan carrying an interest rate of 6% per annum (used to
cover any financing shortfall).
[i=s] By BenZ on 6-21-2010 04:02 last edited[/i]
Solution is continued. For further informations see this page:http://www.hotelmule.com/management/html/56/n-2756.html
[i=s] By Owen on 6-21-2010 06:39 last edited[/i]
1 Attachment 2321
2 Attachment 2322
3 Attachment 2323
Posting Permissions
Reply With Quote
Bookmarks