In connection with the CrownJewel sales estimates provided in the previous problem, past experience has...
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Accounting
In connection with the CrownJewel sales estimates provided in the previous problem, past experience has shown that room variable costs are 20% of room revenue. Sixty percent 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 CrownJewels inventory stocking policy, 40% of food and drink is purchased 1 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 1-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.
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