Exercise 18-12 Computing Sales To Achieve Target Income Lo C2

Posted By Admin @ Mar 01, 2022


Finance
ABC
Institute
Finance
Part: A
Budgeted Revenue
Budgeted room revenue calculated for three months December, January, and February are presented below:
Revenue for the month of December
Occupancy of Rooms 85%
Total Number of Rooms 20
Revenue per room 150
Total revenue for the month $ 2,550.00
Revenue for the month of January
Occupancy of Rooms 95%
Total Number of Rooms 20
Revenue per room $165
Total revenue for the month $ 3,135.00
Revenue for the month of February
Occupancy of Rooms 90%
Total Number of Rooms 20
Revenue per room $150
Total revenue for the month $ 2,700.00
Total Revenue of 3 Month
Revenue for the month December $ 2,550.00
Revenue for the month January $ 3,135.00
Revenue for the month February $ 2,700.00
Total Revenue of 3 Month $ 8,385.00
2) Estimated Occupancy Rate
The occupancy rate of hotel rooms is a supportive factor for the calculation of future revenue. The Dorquay Hotel would have estimated the occupancy rate through the use of demand forecasting method. Management of the hotel would have used historical information about hotel occupancy to estimate future occupancy rate in December, January, and February.
Part: b
1) Mr Smith Trip and Ethical Concerns
Objectivity, integrity, and independence are the key objectives and concerns of ethics. In accordance with the analysis of the given scenario, it is clear that the trip would not cost to Mr Smith and his family as it is an all-expenses-paid package for them. In the result of this trip, it would be considered that it was a gift trip to Los Angeles that may draw an impact on the software chosen. Because of this free trip, Mr Smith would become obligated and thankful to Dogto Ltd. which will influence their decision regarding software selection. Thus, the critical evaluation shows that it would be a lack of independence in decision making and it would appear as a conflict of interest. Although, the trip would be an opportunity for Mr Smith to get more understanding about that particular software. Furthermore, he would be able to directly interact and meet with the current users of this software without spending additional funds on Practical Solutions Ltd. However, apart from these benefits, I would recommend him not to take this gift from Dogto Ltd. as it would be later caused in decision making. Ethically it would not be appropriate