Pinetree Motel
Question 1) Prepare the operating statement for the Pine Tree Motel showing percentage of total revenues.
Ans:
Operating statement : Sr.No. | Items | Amount (in $) | % of total revenue | 1 | Revenues | | | | Room rentals | 2,36,758 | 96.84 | | Other revenue | 7703 | 3.15 | 2 | Total revenue | 2,44,461 | 100 | | | | | 3 | Operating expenses | | | a | Payroll ( costs + tax)(26,305+2894+1128+126-795-84) | 29574 | 12.09 | b | Admin & General | Nil | | c | Direct operating expenses | | | i | laundary | 8880 | | ii | Replacement of glass,bed linen etc. | 1660 | | iii | Cleaning &Supplies (6820+75) | 6895 | | | Total direct operating expenses | 17,355 | 7.09 | d | Fees & commissions | Nil | | e | Advt. & promotions (2335+996-600) | 2731 | 1.1 | f | Repairs & maintenance | 8980 | 3.67 | g | Utilities ( telephone/electricity/fuel for heating) | 20,692 | 8.46 | h | Owner’s drawing | 86100 | 35.22 | | Total operating expenses | 1,65,432 | 67.67 | | | | | 4 | Fixed expenses | | | a | Property taxes, fees(9870-1005+1119) | 9984 | 4.08 | b | Insurance (11584-2025) | 9559 | 3.91 | c | Interest (10605-687+579) | 10497 | 4.29 | d | Rent | nil | | e | Depreciation (12.5% of assets) | 30,557 | 12.5 | | Total fixed expenses | 60,597 | 24.78 | | Total expenses | 2,26,029 | | 5 | Profit (gross) | 18432 | 7.53 |

Ques 2) As Mr. Carter, what comments would you make to the Kims regarding the motel progress till date ?
Ans: The motel is actually earning much less profit compared to the survey report. The major contribution to the expenses for Kims is coming from the payroll of employees and their own drawings. Rest of the expenses are comparable to the survey findings. Payroll expenses are more than double the survey report. Hence Kims need to focus on