The Master Budg Serial Case C9-73 Calculate breakeven and margin of safety after

Question

The Master Budg Serial Case C9-73 Calculate breakeven and margin of safety after hotel renovation Learning Objective 2) This case is a continuation of the Caesars Entertainment Corporation serial case that began in Chapter 1. Refer to the introductory story in Chapter 1 (see page 43) for additional back ts of the Caesars serial case can be completed in any order.) Caesars Palace Las Vegas will use budgets to make its financial plans. Let's assume tha rs prepares budgets for each of its hotel towers, includin budgeting assumptions10 for the Julius Tower for 2016: ground. (The componen g the new Julius Tower. Here is a Caesa list of Data table for Julius Tower budget assumptions Number of hotel rooms in the Julius Tower 587 91 .2% Average occupancy rate for Caesars Entertainment Corporation Average hotel room rate per night Total budgeted fixed costs for the Julius Tower Variable cost per Julius Tower room night $ 149 $ 2,390,000 27 Requirements 1. How many Julius Tower hotel room nights should be budgeted to be booked in 2016? (Remember that 2016 is a leap year and, therefore, has an extra calendar day or 366 days.) What would be the budgeted net revenue from the Julius Tower hotel rooms in 2016? 2. 3. What would be the budgeted variable costs for the Julius Tower hotel in 2016 Prepare a budget for 2016 for the Julius Tower using the assumptions provided above and the numbers you have calculated. Does it appear that the Julius Tower will be generating a healthy amount of income for Caesars Palace Las Vegas? 4. Explain.

Explanation / Answer

Hotel rooms 587 No fo days 366 Occupany ratio 91.20% Hotel room nights budgeted =587*366*91.2%                  195,936 Average hotel room rate per night 149 Budgeted net revenue =195936*149            29,194,464 Average variable cost per night 27 Budgeted net revenue =195936*27               5,290,272 Income Statement Revenue            29,194,464 Less variable cost            (5,290,272) Contribution            23,904,192 Less Fixed cost            (2,390,000) Profit            21,514,192

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