Case Study Individual Assignment: Texas Star Lodging

ACCT3104 Case Studies Page 1
ACCT3104 Management Accounting
Semester 1, 2020
Case Study Individual Assignment
Texas Star Lodging
(Weight: 20% of Final Grade)
Due Date for Submission: Midday on Monday 18th May, 2020
TEXAS STAR LODGING
Sitting at his desk reviewing the results of the last year (i.e., the year 2020), Brian Smith
reflected back on his second year as General Manager of the Texas Star Hotel. Next week is the
Regional Operations Review in nearby Lubbock, where managers from surrounding areas will
gather with Elizabeth Jennings, Regional Vice President of Operations. Brian will need to
summarise the hotel’s performance and, recalling variance analysis, thought this tool would be a
rigorous way to conduct his analysis.
Company Background
The Texas Star Hotel is a 126-room economy-lodging hotel in Amarillo, Texas. Built in
1980, it is part of Texas Star Lodging, a privately-owned hotel chain headquartered in suburban
Houston, Texas. Texas Star operates a network of 207 hotels in four states: Texas, New Mexico,
Oklahoma and Arkansas. About half of the hotels are owned and operated by the company.
Present Situation
Renovated two years ago, the hotel competes with sixteen other economy-lodging hotels
in a market that is more competitive than most. However, when thinking about its market share,
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company management actually considers three nearby hotels to be its direct competitors. Sales
data on regional and local competitors for the past five years are regularly obtained from an
industry benchmarking firm. See Exhibit 1. In the hospitality industry, average sales price is
average daily rate (ADR), defined as the total room revenue divided by the number of rooms
rented. Another industry-standard metric, occupancy, represents capacity utilisation. Occupancy
is defined as the total number of rooms rented (i.e., output) divided by the number of rooms
available during the period (i.e., capacity). In preparing his budget, Brian expected the 2020 market
size to be 10% higher than the 2019 market size. For 2020, the benchmarking firm reported that
local competitors rented 77,291 rooms at an ADR of $59.80.
Exhibit 2 shows the 2020 monthly budget Brian had developed to submit the required
annual budget. A description of accounts is shown in Exhibit 3.
Analysis
Using the available information, Brian Smith created a series of variance analyses to assess
the performance of the hotel (see Table 1 & 2). All variances are summarised in Figure 1. (Note,
for this case study assignment you are not required to perform any additional variance
analyses beyond those provided).
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Exhibit 1 Local and Regional Competitor Sales Data
Local Competitors Metropolitan Area
Rooms ADR Occupancy Rooms ADR Occupancy
Year Rented ($) (%) Rentals ($) (%)
2015 96,099 60.77 58.72 181,361 47.53 56.11
2016 104,013 64.70 58.16 196,033 54.78 59.15
2017 100,651 65.86 55.86 215,797 59.04 62.80
2018 94,268 67.67 51.55 218,162 62.73 59.35
2019 79,391 62.40 43.41 192,519 55.73 51.81
Note. ADR is Average Daily Rate and is measured as total revenue divided by the number of
rooms rented (i.e., sales price). Occupancy is measured as rooms rented divided by the total
number of rooms available × 100 (i.e., capacity utilisation).
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Exhibit 2 Brian’s Monthly Budget Worksheet
Item Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Rooms Available 3,906 3,528 3,906 3,780 3,906 3,780 3,906 3,906 3,780 3,906 3,780 3,906 45,990
Rooms Rented 2,247 2,100 2,210 2,484 2,195 2,390 2,297 2,730 2,303 1,890 2,239 2,291 27,376
Occupancy 57.5% 59.5% 56.6% 65.7% 56.2% 63.2% 58.8% 69.9% 60.9% 48.4% 59.2% 58.7% 59.5%
ADR $42.00 $40.00 $40.00 $44.00 $42.00 $48.00 $48.00 $50.00 $46.00 $44.00 $38.00 $42.00 $43.79
RevPAR $24.14 $23.79 $22.61 $28.89 $23.58 $30.31 $28.19 $34.91 $27.99 $21.26 $22.49 $24.62 $26.07
Revenues
Room Rentals $94,374 $84,000 $88,400 $109,296 $92,190 $114,720 $110,256 $136,500 $105,938 $83,160 $85,082 $96,222 $1,200,138
Revenue Allowance 80 80 80 100 100 140 160 160 130 100 80 70 1,280
Total Room Revenue $94,294 $83,920 $88,320 $109,196 $92,090 $114,580 $110,096 $136,340 $105,808 $83,060 $85,002 $96,152 $1,198,858
Internet Access $402 $376 $396 $445 $393 $428 $411 $489 $412 $338 $401 $410 $4,900
Vouchers 410 384 404 454 401 437 420 499 421 345 409 418 5,000
Laundry 50 50 50 80 80 200 200 200 200 100 50 50 1,310
Vending 150 150 150 240 300 600 600 600 500 300 160 150 3,900
Total Other 1,013 959 999 1,218 1,174 1,664 1,631 1,787 1,533 1,083 1,020 1,028 15,110
Total Revenue $95,307 $84,879 $89,319 $110,414 $93,264 $116,244 $111,727 $138,127 $107,341 $84,143 $86,022 $97,180 $1,213,968
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Exhibit 2 Brian’s Monthly Budget Worksheet (continued)
Item Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Expenses
General Manager $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $28,800
Front Desk Staff 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000
Total Front Office $8,400 $8,400 $8,400 $8,400 $8,400 $8,400 $8,400 $8,400 $8,400 $8,400 $8,400 $8,400 $100,800
Head Housekeeper $1,583 $1,583 $1,584 $1,583 $1,583 $1,584 $1,583 $1,583 $1,584 $1,583 $1,583 $1,584 $19,000
Housekeepers 6,698 6,183 6,568 7,527 6,516 7,198 6,873 8,388 6,894 5,448 6,670 6,853 81,816
Total Housekeeping $7,865 $7,350 $7,735 $8,694 $7,683 $8,365 $8,040 $9,555 $8,061 $6,615 $7,837 $8,019 $95,816
Maintenance Wages $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $1,725 $20,700
Regional Maintenance 265 265 265 265 265 265 265 265 265 265 265 265 3,180
Incentive Pay (staff) 0 0 0 0 0 0 0 0 0 0 0 0 0
Bonus Expense, GM 210 210 210 210 210 210 210 210 210 210 210 210 2,520
Payroll Taxes 1,569 1,526 1,558 1,640 1,554 1,612 1,584 1,713 1,586 1,463 1,567 1,583 18,956
Total Other Personnel $3,769 $3,726 $3,758 $3,840 $3,754 $3,812 $3,784 $3,913 $3,786 $3,663 $3,767 $3,783 $45,356
Gross Payroll $20,034 $19,476 $19,893 $20,934 $19,837 $20,577 $20,224 $21,868 $20,247 $18,678 $20,004 $20,201 $241,972
Vacation Expense $475 $475 $475 $475 $475 $475 $475 $475 $475 $475 $475 $475 $5,700
Holiday Expense 135 135 135 135 135 135 135 135 135 135 135 135 1,620
Staff Incentives 35 35 35 35 90 90 90 90 35 35 35 35 640
Employee Relocation 0 0 0 0 0 0 0 0 0 0 0 0 0
Employee Training 720 140 140 140 140 140 140 140 140 140 140 140 2,260
Workers Compensation 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000
Health Insurance 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 28,800
Retirement Plan Contr. 60 60 60 60 60 60 60 60 60 60 60 60 720
Group Life Insurance 56 56 56 56 56 56 56 56 56 56 56 56 672
Total Benefits Expense $5,381 $4,801 $4,801 $4,801 $4,856 $4,856 $4,856 $4,856 $4,801 $4,801 $4,801 $4,801 $58,412
Total Personnel Costs $25,415 $24,277 $24,694 $25,735 $24,693 $25,433 $25,080 $26,724 $25,048 $23,479 $24,805 $25,002 $300,384
Total Supplies $2,135 $1,995 $2,100 $2,360 $2,085 $2,271 $2,182 $2,594 $2,188 $1,796 $2,127 $2,176 $26,007
Membership & Subs. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $300 $300
Travel 280 280 280 280 280 280 280 280 280 280 280 280 3,360
Meals 70 70 70 70 70 70 70 70 70 70 70 70 840
Total Travel & Meals $350 $350 $350 $350 $350 $350 $350 $350 $350 $350 $350 $650 $4,500
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Exhibit 2 Brian’s Monthly Budget Worksheet (continued)
Item Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Expenses (continued)
Bad Debt Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash Shortage/Excess 0 0 0 0 0 0 0 0 0 0 0 0 0
Bank Deposit Short/Exc. 0 0 0 0 0 0 0 0 0 0 0 0 0
Credit Card Chargeback 0 0 0 0 0 0 0 0 0 0 0 0 0
Credit Cards (40% cc) 1,144 1,019 1,072 1,325 1,119 1,395 1,341 1,658 1,288 1,010 1,032 1,166 14,568
Guest Vouchers 98 92 97 109 96 105 101 120 101 83 98 100 1,200
Refunded Rentals 82 77 81 91 80 87 84 100 84 69 82 84 1,000
Total Guest Finance $1,324 $1,187 $1,249 $1,525 $1,296 $1,587 $1,525 $1,877 $1,473 $1,162 $1,212 $1,350 $16,768
Other External Services 50 50 50 50 50 50 50 50 50 50 50 50 600
Total Misc. Operating $1,724 $1,587 $1,649 $1,925 $1,696 $1,987 $1,925 $2,277 $1,873 $1,562 $1,612 $2,050 $21,868
Property Marketing $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $6,000
Building $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $1,800
Landscaping 825 825 825 825 825 825 825 825 825 825 825 825 9,900
Contracts 675 675 675 675 675 675 675 675 675 675 675 675 8,100
Laundry 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Rooms 200 200 200 200 200 200 200 200 200 200 200 200 2,400
HVAC 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Pool 0 0 0 0 300 0 600 600 100 0 0 0 1,600
Electrical & Fire 360 360 360 360 360 360 360 360 360 360 360 360 4,320
Plumbing 275 275 275 275 275 275 275 275 275 275 275 275 3,300
Supplies 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Unclassified (petty cash) 75 75 75 75 75 75 75 75 75 75 75 75 900
Total R&M $3,760 $3,760 $3,760 $3,760 $4,060 $3,760 $4,360 $4,360 $3,860 $3,760 $3,760 $3,760 $46,720
Electricity $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $42,000
Natural Gas 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 16,800
Water 2,750 2,750 2,750 2,750 2,750 2,750 2,750 2,750 2,750 2,750 2,750 2,750 33,000
Total Energy $7,650 $7,650 $7,650 $7,650 $7,650 $7,650 $7,650 $7,650 $7,650 $7,650 $7,650 $7,650 $91,800
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Exhibit 2 Brian’s Monthly Budget Worksheet (continued)
Item Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Expenses (continued)
Garbage Collection $310 $310 $310 $310 $310 $310 $310 $310 $310 $310 $310 $310 $3,720
Sewer 1,575 1,575 1,575 1,575 1,575 1,575 1,575 1,575 1,575 1,575 1,575 1,575 18,900
Salt (water softener) 0 350 0 350 0 350 0 350 0 350 0 350 2,100
Telephone 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Satellite TV Subscr. 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 15,000
Utility Fees 75 75 75 75 75 75 75 75 75 75 75 75 900
Total Other Utilities $4,210 $4,560 $4,210 $4,560 $4,210 $4,560 $4,210 $4,560 $4,210 $4,560 $4,210 $4,560 $52,620
TOTAL EXPENSES $45,394 $44,329 $44,563 $46,489 $44,893 $46,161 $45,907 $48,665 $45,329 $43,306 $44,664 $45,699 $545,399
PROFIT $49,913 $40,550 $44,756 $63,925 $48,370 $70,084 $65,819 $89,463 $62,012 $40,837 $41,358 $51,482 $668,569
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Exhibit 3 Account Descriptions
Revenue Accounts
Room Rentals. Revenue derived from room rentals. It is the average daily rate times rentals.
Revenue Allowance. Revenue allowances are refunds offered at the property at time of departure.
Internet Access. Revenue derived from the sale of daily guest Wi-Fi/Internet access.
Vouchers. Revenue from guests paying for their stay with guest vouchers.
Laundry. Revenue from customer use of coin-operated laundry equipment (washer and dryer).
Vending. Revenue received from customer purchases at on-site vending machines.
Expense Accounts
General Manager. Wages paid to the general manager. Managers receive free, on-site housing and
utilities (electric, telephone, cable TV, etc.)
Front Desk Staff. Wages paid to employees working the front desk for customer check-in.
Total Housekeeping. Wages paid to employees that clean the room and clean laundry.
Maintenance Wages. Wages paid to an on-site maintenance worker.
Regional Maintenance Support. Wages for the regional maintenance person when on-site.
Incentive Pay (staff). Amounts paid to motivate employees. This is usually zero.
Bonus Expense, General Manager. Bonus expense paid to the general manager when specific
performance targets are met. Bonus amounts are fixed for each goal and 90% of GMs receive their
full bonus (i.e., bonuses are highly achievable).
Payroll Tax Expense. Amounts paid for payroll taxes. It is 8.5% of amounts paid to employees.
Vacation Expense. Amounts accrued to pay for the general manager’s vacation.
Holiday Expense. Amounts accrued to pay for the general manager’s paid holidays.
Staff Incentives. Amounts paid for anything that incentives hotel staff. For example, many general
managers provide “pizza parties” on employee birthdays, or lunch on busy days.
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Employee Relocation Expense. Amounts paid to reimburse employees who relocate to a new
property. This amount is normally zero and the company normally only pays to relocate a general
manager (a rare event).
Employee Training. Amounts paid for employee training. Training is provided for general
managers and managers-in-training.
Workers Compensation. The amounts charged to workers’ compensation are based on expected
insurance claim plus any expenses that develop over time. Amounts are actuarial estimates and,
while budgeted by the general manager, the manager does not determine the amounts.
Health Insurance. Amounts paid for employee group health insurance. Since benefits are provided
after 6 months of service, most staff do not participate in the insurance plan. (This is because
employee turnover in low-skill, hospitality jobs is about very high; at the Amarillo property,
turnover for housekeeping staff was 211% in the prior year.)
Retirement Plan Contribution Expense. Amounts paid by the company for employee retirement
contributions. As with health insurance, few employees are with the firm long enough to
participate in the plan and contributions are often solely for the general manager (where job tenure
averages about 2.8 years).
Group Life Insurance. Expenses related to the provision of group life insurance. As with the prior
two benefits plans, group life insurance is typically only being provided to the general manager.
Supplies. Expenses for all supplies. In prior years, supplies were listed in one category but, after
the 2017 budget was prepared, the company developed several sub-accounts for supplies. Supplies
at most hotels include guest amenities (e.g., soap, shampoo and hand cream), cleaning chemicals
(e.g., carpet and floor cleaners and surface cleaners), postage, uniforms, freight, coffee and linens.
Memberships and Subscriptions. Amounts paid for memberships (e.g., the local chamber of
commerce)
Travel. Amounts paid to reimburse employees who travel for company business. Most of the time
the only reimbursement is for personal use of the car to make the daily cash deposit at the bank
(i.e., mileage times the IRS-approved mileage reimbursement rate). Off-site travel is rare as
regional managers visit properties for performance reviews and support.
Meals. Reimbursement for meal expenses. Expenses are typically incurred when a general
manager is out of town for a meeting (e.g., the national or a regional meeting) or doing part-time
duty as a relief general manager (from time to time a manager may be terminated and it may take
some weeks or months to find a replacement). Meal expenses are relatively rare.
Bad Debt Expense. Amounts recorded to this account reflect credit transactions that have been
“written off.” Since most transactions are handled in cash or with a credit card, bad debt expense
is uncommon.
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Cash Shortage and Excess. These amounts arise when the actual cash on hand differs from the
amount that should be on hand, according to the property’s financial records. Since there are
multiple employees handling cash, the amounts are not easily traced to a specific person.
Discrepancies can occur from providing the incorrect change for a cash transaction, receiving an
an amount less than billed, etc.
Bank Deposit Shortage and Excess. These amounts arise when the bank deposit does not match
the amount that was supposed to have been deposited. When a discrepancy occurs, the bank’s
amount is taken as the correct amount because of counting machines and good video surveillance
at banks. If the general manager makes random, counting mistakes, these discrepancies should be
small and should average out to zero. A persistent shortage is a strong signal that cash is being
misappropriated. The general manager is the only person to make the daily bank deposit, so any
shortage or excess is the responsibility of one person.
Credit Card Chargeback. Amounts refunded to credit card companies. These occur because of
fraudulent credit card use and customer complaints (i.e., the firm granting a refund several days
after the visit).
Credit Card Fees. Amounts paid to credit card companies for processing credit cards. Typically,
this averages about 3% of the transaction cost. At most properties, more than 70% of transactions
are settled in cash.
Guest Vouchers. Guests who received a voucher for compensation are able to use that voucher for
a free night’s stay at any branded hotel in the network. The hotel who hosts a guest with a voucher
records the revenue and the property that issued the guest voucher is charged for the guest visit
and its expense is recorded to this account.
Refunded Rentals. These amounts are for customer refunds that occur off-property, often weeks
after a guest visit. Almost always, these refunds are handled by the customer service staff at the
corporate headquarters. Functionally, it is no different in financial impact than a revenue
allowance.
Other External Services. Amounts paid to any third-party providers that are not related to
maintenance. Security services is the most common expense related to this account.
Property Marketing. Amounts spent by the general manager for local advertising and marketing.
Marketing activities include newspaper advertising, coupon booklets, billboards, direct mail,
sponsoring a community athletic club, etc.
Building. Repairs and maintenance expenses related to the building.
Landscaping. Amounts paid for lawn care, new shrubbery, tree trimming, etc.
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Contracts. Amounts paid to third parties that provide services to the hotel. This would include, for
example, service contracts for the laundry equipment and pest control (termites, bed bugs, rodents,
cockroaches, ants, etc.).
Laundry. Repairs and maintenance expenses related to the laundry equipment (washer, dryer,
folder, etc.).
Rooms (floors, doors, windows, etc.). All expenses related to the repair and maintenance of the
guest rooms (carpets, walls, windows, light fixtures, etc., except those items accounted for
elsewhere (e.g., plumbing and climate control equipment).
HVAC. Repair and maintenance expenses related to heating, ventilation and air conditioning units.
In most properties, including the case property, HVAC is handled by in-wall, all-in-one units.
Pool. All amounts paid for maintaining the swimming pool. This would include paint, chemicals,
pump repairs, diving board repairs, upkeep of the surface and fences surrounding the pool, etc.
Electrical and Fire. All costs related to the repair and maintenance of electrical and fire safety
equipment.
Plumbing. All expenses related to repairs and maintenance of plumbing and related fixtures (e.g.,
showers, bathtubs, sinks, toilets and the hot water heater).
Supplies. Amounts paid for supplies related to repairs and maintenance (e.g., duct tape, silicone,
nuts, bolts and small tools).
Unclassified (including petty cash). This category is for all expenses related to repairs and
maintenance that are not classified in any of the other accounts for repairs and maintenance.
Electricity. Amounts paid for electricity. Electricity is used in guest rooms (outlets, lighting,
heating and air condition, etc.), in the lobby, for exterior lighting (parking lot, corridors), and in
the laundry room.
Natural Gas. Amounts paid for natural gas. Natural gas is used for the boiler (water) and dryer
(laundry). Rooms are heated using electricity.
Water. Amounts paid for water. Water is used in guest rooms, for the washing machine, to fill the
pool and water the lawn.
Garbage Collection. Garbage is picked up twice a week by a licensed waste hauler using their
waste containers located at a corner of the property. Garbage is usually limited to a handful of
providers, some of which are national firms.
Sewer. Amounts paid to the city for hook-up to the city sewer system.
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Salt (water softener). Amounts paid for salt used in a water softener.
Telephone. All costs related to telephone equipment (e.g., depreciation, repairs) and monthly
telecommunications fees.
Satellite Television Subscription Fees. Expenses for subscription of television programming
delivered by a satellite provider (e.g., DishTV or DirecTV).
Utility Fees. Amounts paid to utilities firms for connection and service fees.
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Table 1
Level-2 Variance Analysis
Sales Volume Flex Flex-Budget
Budget Variance Budget Variance Actual
Rooms Available 45,990 0 45,990 0 U 45,990
Rooms Rented 27,376 1,941 U 25,435 0 U 25,435
Occupancy 59.5% 4.2% U 55.3% 0.0% U 55.3%
ADR $43.79 $0.00 U $43.79 $0.85 F $44.65
RevPAR $26.07 $1.87 U $24.19 $0.50 F $24.69
Revenues
Room Rentals $1,200,138 $85,092 U $1,115,046 $21,573 F $1,136,619
Revenue Allowance -1,280 91 F -1,189 129 F -1,060
Total Room Revenue $1,198,858 $85,001 U $1,113,857 $21,702 F $1,135,559
Internet Access $4,900 $347 U $4,553 $981 F $5,534
Vouchers 5,000 355 U 4,645 3,383 U 1,262
Laundry 1,310 93 U 1,217 23 F 1,240
Vending 3,900 277 U 3,623 85 F 3,708
Total Other $15,110 $1,071 U $14,039 $2,295 U $11,744
Total Revenue $1,213,968 $86,073 U $1,127,895 $19,408 F $1,147,303
Expenses
General Manager $28,800 $0 F $28,800 $1,366 F $27,434
Front Desk Staff 72,000 0 F 72,000 10,089 U 82,089
Head Housekeeper 19,000 0 F 19,000 3,226 U 22,226
Housekeepers 81,816 6,793 F 75,023 7,533 U 82,556
Maintenance Wages 20,700 0 F 20,700 2,877 U 23,577
Regional Maintenance Support 3,180 0 F 3,180 3,272 U 6,452
Incentive Pay (staff) 0 0 F 0 0 F 0
Bonus Expense, General Manager 2,520 0 F 2,520 1,174 F 1,346
Payroll Tax Expense 19,381 577 F 18,804 2,535 U 21,339
Gross Payroll $247,397 $7,370 F $240,027 $26,992 U $267,019
Vacation Expense $ 5,700 $ 0 F $ 5,700 $ 2,206 F $ 3,494
Holiday Expense 1,620 0 F 1,620 70 U 1,690
Staff Incentives 640 0 F 640 1 F 639
Employee Relocation Expense 0 0 F 0 1,506 U 1,506
Employee Training 2,260 0 F 2,260 1,684 F 576
Workers Compensation 18,000 0 F 18,000 412 F 17,588
Health Insurance 28,800 0 F 28,800 8,795 F 20,005
Retirement Plan Contribution Expense 720 0 F 720 121 U 841
Group Life Insurance 672 0 F 672 59 F 613
Total Personnel Costs $305,809 $7,370 F $298,439 $15,532 U $313,971
Total Supplies $26,007 $1,844 F $24,163 $13,900 U $38,063
Memberships & Subscriptions $300 $0 F $300 $300 F $0
Travel 3,360 0 F 3,360 781 U 4,141
Meals 840 0 F 840 81 U 921
Total Travel & Meals $4,500 $0 F $4,500 $562 U $5,062
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Table 1
Level-2 Variance Analysis (continued)
Sales Volume Flex Flex-Budget
Budget Variance Budget Variance Actual
Bad Debt Expense $0 $0 F $0 $350 U $350
Cash Shortage and Excess 0 0 F 0 113 U 113
Bank Deposit Shortage and Excess 0 0 F 0 27 U 27
Credit Card Chargeback 0 0 F 0 619 U 619
Credit Card Fees (40% cc & 3% fee) 14,568 1,033 F 13,535 856 U 14,376
Guest Vouchers 1,200 85 F 1,115 575 F 540
Refunded Rentals 1,000 71 F 929 958 U 1,887
Total Other Expense $16,768 $1,189 F $15,579 $2,333 U $17,912
Other External Services 600 0 F 600 122 U 722
Total Misc. Operating Expenses $21,868 $1,189 F $20,679 $3,017 U $23,696
Property Marketing $6,000 $ 0 F $6,000 $1,193 F $4,807
Building $1,800 $0 F $1,800 $113 U $1,913
Landscaping 9,900 0 F 9,900 624 U 10,524
Contracts 8,100 0 F 8,100 360 U 8,460
Laundry 6,000 0 F 6,000 3,287 F 2,713
Room (floors, doors, windows, etc.) 2,400 0 F 2,400 3,210 U 5,610
HVAC 4,800 0 F 4,800 1,581 F 3,219
Pool 1,600 0 F 1,600 847 U 2,447
Electrical and Fire 4,320 0 F 4,320 1,532 U 5,852
Plumbing 3,300 0 F 3,300 1,943 U 5,243
Supplies 3,600 0 F 3,600 560 U 4,160
Unclassified (petty cash) 900 0 F 900 1,511 U 2,411
Total R&M $46,720 $0 F $46,720 $5,832 U $52,552
Electricity $42,000 $0 F $42,000 $5,856 F $36,144
Gas 16,800 0 F 16,800 3,372 F 13,428
Water 33,000 0 F 33,000 11,081 F 21,919
Total Energy $91,800 $0 F $91,800 $20,309 F $71,491
Trash $3,720 $0 F $3,720 $226 F $3,494
Sewer 18,900 0 F 18,900 2,740 F 16,160
Salt (water softener) 2,100 0 F 2,100 360 F 1,740
Telephone 12,000 0 F 12,000 1,476 F 10,524
Satellite Television Subscription Fees 15,000 0 F 15,000 1,587 F 13,413
Utility Fees 900 0 F 900 98 F 802
Total Other Utilities $52,620 $0 F $52,620 $6,487 F $46,133
TOTAL EXPENSES $550,824 $10,403 F $540,421 $10,292 U $550,713
PROFIT $663,144 $75,669 U $587,475 $9,115 F $596,590
ACCT3104 Case Studies Page 15
Table 2
Computing Market Variances
1 2 3 4 5
Market Size B A A A A
Market Share B B A A A
Sales Prices B B B A A
Costs B B B B A
Note: B = Budget; A = Actual.
Market Size 87,330 77,291 77,291 77,291 77,291
Market Share 31.35% 31.35% 32.91% 32.91% 32.91%
Rooms Rented 27,376 24,229 25,435 25,435 25,435
Static Flexible
Budget Budget Actual
Total Revenue $ 1,213,968 $ 1,074,416 $ 1,127,895 $ 1,147,303 $ 1,147,303
Total Expenses 550,824 533,956 540,421 540,421 550,713
Profit $ 663,144 $ 540,460 $ 587,474 $ 606,882 $ 596,590
Market Size Variance $ 122,684 U
Market Share Variance $ 47,014 F
Sales Prices Variance $ 19,408 F
Costs Variances $ 10,292 U
ACCT3104 Case Studies Page 16
Figure 1
Representation of Variances
ACCT3104 Case Studies Page 17
— END OF CASE STUDY DOCUMENT —

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