Hotel Profit and Loss Analysis Case Study: Decision Analysis and Investment Recovery

**III. Decision Analysis Cases**

Case 5: The previous period's cost accounting data for the food and beverage department of a hotel is as follows:

| 1 | Food ingredient cost | 12.8 yuan/person |

| 2 | Salary and Social Security | 13.4 yuan/person |

| 3 | Cost of non-permanent staff | 1.5 yuan/person |

| 4 | Management of advertising and maintenance, etc. | 5.4 yuan/person |

| 5 | Water, electricity, and fuel costs | 1.7 yuan/person |

Total cost per person: 34.8 yuan

The Food and Beverage Department plans to organize a large-scale food festival this period. It anticipates an increase of 3,860 guests, with an average spending of 54.8 yuan per person. However, organizing this event will require an additional 83,600 yuan in advertising and promotional expenses. After reviewing the report, the hotel manager, based on the following calculations, rejected this short-term decision.

| Total Income | 3860 × 54.8 = 211528 yuan |

| Cost Reduction (1) | 3860 × 34.8 = 134328 yuan |

Additional advertising and promotion: ¥83,600 |

| Loss Amount | -6400 yuan |

Please answer the following questions:

1. Was the manager right to reject this decision? Why?

2. If you were the manager, please recalculate and see if these decisions should be rejected.

3. In this event, what is the minimum number of additional guest visits required to offset the extra advertising and promotion costs of 83,600 yuan?

4. In this event, if the number of additional guests can only reach 2948, what is the minimum profit per person?

Case Study Assignment:

1. Answer: The hotel manager's rejection of this decision is incorrect. The manager's basis for rejecting the decision violates the fundamental principles of profit and loss analysis. The number of guests served at the food festival organized by the catering department increased from the original level, i.e., on the break-even point. After exceeding the break-even point, the increased revenue only increases variable costs, not fixed costs, because fixed costs have already been fully covered. However, the manager's calculations were based on all costs, hence the loss of 6400 yuan. Therefore, the manager's rejection of this decision is incorrect.

2. Calculated correctly, in the cost accounting data, only the food raw material cost of 12.8 yuan, the cost of non-staff personnel of 1.5 yuan, and the cost of water, electricity, and fuel of 1.7 yuan are variable costs, totaling 12.8 + 1.5 + 1.7 = 16 yuan. Other costs, including wages, overall planning and management, and advertising, are fixed costs. Therefore, the correct calculation should be:

| Total Income | 3860 × 54.8 = 211528 yuan |

| Cost reduction (1) | 3860 × 16 = 61760 yuan |

Additional advertising and promotion: ¥83,600 |

| Profit | 66,168 yuan |

Therefore, this decision should not be rejected, but rather upheld. It could generate a profit of 66,168 yuan.

3. The number of visitors required to offset additional advertising costs can be calculated using the following formula:

(people)

4. If the number of additional visitors can only reach 2948, the average profit per visit can be calculated using the following formula:

(RMB/person)

Case Study 6: A hotel plans to build a new restaurant. The budget and feasibility data are as follows:

| 1 | Budgeted Construction Investment | 2,486,800 yuan |

| 2 | Investment recovery period | 3 years |

| 3 | Annual depreciation | 87,500 yuan |

| 4 | Revenue per person from tickets and beverages | 58.41 yuan |

| 5 | Variable cost per person | 9.24 yuan |

| 6 | Budgetary Staff Salaries and Overall Planning | 186,800 yuan |

| 7 | Planned annual profit after recouping investment | 253,600 yuan |

The question asks under what circumstances a hotel can make an investment decision regarding this recreational project.

Case Study Assignment:

1. Calculate the annual fixed costs during the payback period:

(10,000 yuan)

2. Calculate the number of customers required to break even during the investment payback period using the principles of profit and loss analysis:

=61.47≈62 (people)

3. Calculate the required number of visitors per day for the dance hall to achieve an annual profit of 253,600 yuan:

=75.6≈76 (people)

A: Whether to adopt this decision depends primarily on the required daily visitor numbers. Calculations show that after the dance hall is built, a daily visitor count of 62 people, with an average revenue of 58.41 yuan per person from entrance fees and beverages, will break even. If the daily visitor count reaches 76 people, an annual profit of 253,600 yuan can be achieved.