Managerial Accounting:
Workshop 1
Income Statement / USALI
Sales = price * quantity
Costs = (v * quantity) + fixed costs
Sales - costs = result (profit or loss)
Costs:
Fixed = always the same (rent)
Variable = depends on revenue
Direct / operating = can be linked directly to department (kitchen staff salary)
Indirect / overhead = can’t be linked directly to department (general manager salary)
(overhead costs)
USALI-format
Departmental sales
- operating expenses (directly linked to department)
= departmental profit / income (rooms + F&B + others)
- undistributed operating expenses (=overhead)
= gross operating profit (G.O.P.)
- fixed charges (fixed amount per period)
= NET profit / Overall Income (before taxes)
Gross profit = departmental sales - cost of sales
revenue - costs of goods sold
Cost of F&B sales is also included in total operating expenses- F&B
Workshop 2:
Budget variance analysis
Variance = difference
Comparing budgeted with actual sales or costs
Sales = price * quantity variance
Higher than expected = Favourable (F)
Lower than expected = Unfavourable (U)
Costs = cost * quantity variance
Higher than expected = Unfavourable (U)
Lower than expected = Favourable (F)
Revenue: Price Variance = Price difference (AP - BP) * Actual Quantity
Quantity Variance = Quantity difference (AQ - BQ)* Budgeted Price
Expenses: Cost Variance = Cost difference (AC - BC) * Actual Quantity
Quantity Variance = Quantity difference (AQ - BQ) * Budgeted Cost
BUDGET VARIANCE = (AP/AC X AQ) - (BP/BC X AQ)
AP = actual price BP = budgeted price
AC = actual cost BC = budgeted cost
AQ = actual quantity BQ = budgeted quantity
AC and AQ lower than BC and BQ ---> Positive
AP and AQ lower than BP and BQ ---> Negative
, Workshop 3:
Elasticity
The relative change in quantity as a consequence of a relative change of price
Δ = ((new-old) : old) x 100%
Ed = (%ΔQ) : (%ΔP) Outcome is negative!
Perfectly inelastic:
No matter the price, always the same quantity Medicins
Perfect elasticity:
Slight change in price, huge change in quantity Ed = -∞ Gas Stations
Unit Elasticity:
Price 10% up -> Quantity 10% up
Price 10% down -> Quantity 10% down
Ed = -1
-1 < Ed < 0 Ed < -1
Relatively Inelastic Relatively Elastic
Elasticity is all about relative (percentages) changes, not absolute (numbers)
Workshop 4:
Room pricing
3 Approaches to cost based room pricing:
How to determine an ADR?
1. The rule of a thousand approach (for projects)
determine investment
determine which part of investment is related to rooms
determine investment per room
divide investment per room by 1000
2. Relative room size approach (for hotels with different room sizes)
assess the surface area of rooms sold daily
determine average revenue required per day
determine average rate to charge each square meter of room space
determine specific rated to charge each room type
3. The bottom up approach (when you have all information of hotel)
Profit for investors
investment x profit = net profit
pre-tax profit x (100%)
-/- tax -25% tax (-25%)
=
net profit ……. (75%)
…. and the -25% tax are always 100% together
+ all other expenses (room, overhead etc.)
- profit others (F&B)
: number of rooms sold (rooms x days open x occupancy%
Workshop 1
Income Statement / USALI
Sales = price * quantity
Costs = (v * quantity) + fixed costs
Sales - costs = result (profit or loss)
Costs:
Fixed = always the same (rent)
Variable = depends on revenue
Direct / operating = can be linked directly to department (kitchen staff salary)
Indirect / overhead = can’t be linked directly to department (general manager salary)
(overhead costs)
USALI-format
Departmental sales
- operating expenses (directly linked to department)
= departmental profit / income (rooms + F&B + others)
- undistributed operating expenses (=overhead)
= gross operating profit (G.O.P.)
- fixed charges (fixed amount per period)
= NET profit / Overall Income (before taxes)
Gross profit = departmental sales - cost of sales
revenue - costs of goods sold
Cost of F&B sales is also included in total operating expenses- F&B
Workshop 2:
Budget variance analysis
Variance = difference
Comparing budgeted with actual sales or costs
Sales = price * quantity variance
Higher than expected = Favourable (F)
Lower than expected = Unfavourable (U)
Costs = cost * quantity variance
Higher than expected = Unfavourable (U)
Lower than expected = Favourable (F)
Revenue: Price Variance = Price difference (AP - BP) * Actual Quantity
Quantity Variance = Quantity difference (AQ - BQ)* Budgeted Price
Expenses: Cost Variance = Cost difference (AC - BC) * Actual Quantity
Quantity Variance = Quantity difference (AQ - BQ) * Budgeted Cost
BUDGET VARIANCE = (AP/AC X AQ) - (BP/BC X AQ)
AP = actual price BP = budgeted price
AC = actual cost BC = budgeted cost
AQ = actual quantity BQ = budgeted quantity
AC and AQ lower than BC and BQ ---> Positive
AP and AQ lower than BP and BQ ---> Negative
, Workshop 3:
Elasticity
The relative change in quantity as a consequence of a relative change of price
Δ = ((new-old) : old) x 100%
Ed = (%ΔQ) : (%ΔP) Outcome is negative!
Perfectly inelastic:
No matter the price, always the same quantity Medicins
Perfect elasticity:
Slight change in price, huge change in quantity Ed = -∞ Gas Stations
Unit Elasticity:
Price 10% up -> Quantity 10% up
Price 10% down -> Quantity 10% down
Ed = -1
-1 < Ed < 0 Ed < -1
Relatively Inelastic Relatively Elastic
Elasticity is all about relative (percentages) changes, not absolute (numbers)
Workshop 4:
Room pricing
3 Approaches to cost based room pricing:
How to determine an ADR?
1. The rule of a thousand approach (for projects)
determine investment
determine which part of investment is related to rooms
determine investment per room
divide investment per room by 1000
2. Relative room size approach (for hotels with different room sizes)
assess the surface area of rooms sold daily
determine average revenue required per day
determine average rate to charge each square meter of room space
determine specific rated to charge each room type
3. The bottom up approach (when you have all information of hotel)
Profit for investors
investment x profit = net profit
pre-tax profit x (100%)
-/- tax -25% tax (-25%)
=
net profit ……. (75%)
…. and the -25% tax are always 100% together
+ all other expenses (room, overhead etc.)
- profit others (F&B)
: number of rooms sold (rooms x days open x occupancy%
