Break Even Point Computation For Hotel 6jr1v
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BEST PRACTICE HOTEL BREAK‐EVEN POINT Drs. Agusttinus Agus Purwanto, MM 2/11/2009
This document is prepared to analysis Budget Year 2009 being proposed to Hotel’s Owner, the objective to compute Break – even Point is to ensure the Monthly breakdown was objective and achievable. To see which month is bad performance and best performance. As Director of Finance will be assist Sales & Marketing to analyze by increasing and reducing the Room Rate when requested Developed by: Drs. Agustinus Agus Purwanto, MM
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Hotel Room Division Break-even Point
Developed by: Drs. Agustinus Agus Purwanto, MM
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www.hotelskonsultan.webs.com BEST PRACTICE HOTEL BREAK-EVENT POINT
1. Formula What is hotel break-even point computed by, the hotel is complex in business operation according to which Departmental Profit we want to compute the “Break-even Point” will meet the difficutly to follow “Break-Even Point” method as following without to know the caracteristic of expenses:
Formula A
BE=FC/ (1-VC %) BE Break Even Point FC Fixed Costs VC Variable Costs
Formula B
BEP = break-even point (units of production) TFC = total fixed costs, VCUP = variable costs per unit of production, SUP = selling price per unit of production
Formula C
1. Break-even point (in units) =
fixed expenses unit contribution margin 2. Contribution-margin ratio =
unit contribution margin unit sales price 3. Break-even point (in sales dollars) =
fixed expenses contribution-margin ratio Formula D
Classic Spread Sheet from Consolidated Budget
Other Formula
Still many other formulas like as Mathematic Equation etc.
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www.hotelskonsultan.webs.com 2. Hotel Departmental Profit In the hotel business has many types of Departmental Profit to follow Uniform System of for Hotel. These departmental profit can be minimized into three profit center as follow: a. Room Division Departmental Profit b. Food and Beverage Division Departmental Profit, and c. Other Operated Departmental Profit
2.1 Room Divison Departmental Profit
The main core business is services but is not really pure services business, because we also supply some operation supplies into the room for free to our guests. Cost and Expenses in the Room Divison Department ussualy categoried as follow: a. Payroll in this Best Practice is Fixed Cost, in the Consuldated Room Division Budget appear constant as Fixed Cost b. Provision in this Best Practice is Fixed Cost, but you can calculate this expenses by percentage of Sales and then become as Vaiable Cost c. Other Expenses in this Best Practice can be Fixed Cost or Variable Cost depend how you calculated in the budget, when is constant every month will be Fixed Cost and when the expenses based on the room occupancy, total sales or number of guest will categoried as Variable Cost If you are not following this method the Break – Even Point figures will be big differences when you are computing with another FORMULA.
2.2 Food and Beverage Division Departmental Profit
The main core business is not services, but combination between service and production / manufacturer, so you have to use different Formula to Food and Beverage Departmental Profit. Which will be analysis on the next Best Practice. Cost and Expenses in the Food and Beverage Departmental Profit different with Room Division Departmental Profit. This Cost and Expensres ussualy categoried as follow: a. Payroll in this Best Practice is Fixed Cost, in the Consuldated Food and Beverage Departmental Budget appear constant as Fixed Cost b. Cost of Sales – In Food and Beverage Departmental Profit has Cost of Sales but in the Room Departmental Profit is not, this expense in this Best Practice as Variable Cost c. Provision in this Best Practice is Fixed Cost, but you can calculate this expenses by percentage of Sales and then become as Vaiable Cost d. Other Expenses in this Best Practice can be Fixed Cost or Variable Cost depend how you calculated in the budget, when is constant every month will be Fixed Cost and when the expenses based on total sales or number of cover will categoried as Variable Cost
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www.hotelskonsultan.webs.com 2.3 Other Operated Departmental Profit The main core business is also not really service, this is combined between service and production, the formula can use the same with Food and Beverage Division Department Profit. When you are using Classic Spread Sheet Break-even Point Analysis will some expenses different classification. Mean in the Food and Beverage Departmental Profit as Variable Cost but in the Other Operated Departmental Profit as Fixed Cost.
3. Classic Spread Sheet Break-even Point Analysis for Room Division The Classic Spread Sheet Break-even Point Analysis is the easier way to calculate Room Divison Departmental Profit Break-even Point. This method can be prepared by following steps: a. STEP ONE Prepare Consulidated Operating Budget Summary and Monthly b. STEP TWO Move the expenses to Fixed Cost for constant expenses and move to Variable Cost for non constant expenses, all exepses calculated based on Occupied Room, Number Guest, Number Cover or Percentage of Sales c. STEP THREE Calculate the Contribution Margin the simple formula as bellow: (S – VC)/S Sales – Variable Cost divided by Sales d. STEP FOUR Calculate the Break-even Sales Volume the simple formula as below: FC/CM Fixed Cost divided by Contribution Margin e. STEP FIVE Do calculation the Break-even Point Analysis by using the Classic Spread Sheet as sample f.
STEP SIX Do test with one of the formula as above or other furmula do you have
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www.hotelskonsultan.webs.com Example: MONTHLY BREAKDOWN OF CONSOLIDATED ROOM DIVISION BUDGET Based on Proposed Budget 2009 BUDGET FOR 2009 - MONTH BY MONTH
Yearly Total
Break-Even Analysis
% of Sales
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
239,986.00
226,089.00
210,177.00
244,581.00
306,720.00
327,720.00
365,324.00
362,475.00
325,616.00
254,896.00
253,186.00
273,228.00
$3,389,998.00
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
$236,620.50
6.98%
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
$18,600.00
0.55%
In House Movie/Satellite TV
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
$2,760.00
0.08%
Music Entertainment
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
$3,000.00
0.09%
Reservation Expenses
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
$900.00
0.03%
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
$3,200.00
0.09%
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
$148,726.15
4.39%
Human Resources
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
$23,529.41
0.69%
Sales & Marketing
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
$82,886.30
2.45%
P.O.M.E.C
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
$43,111.33
1.27%
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
273,600.00
8.07%
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
$9,168.00
0.27%
Depreciation
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
$474,240.00
13.99%
Total Fixed Costs
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
$1,320,341.69
38.95%
Descriptions Sales
Nov-09
Dec-09
Fixed Costs Payroll Provision
Subscription - Newspaper istration & General
Interest Charges Other Fixed Charges
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www.hotelskonsultan.webs.com Variable Costs T/A Commission
540.06
414.36
678.90
730.06
471.44
542.16
762.40
569.70
452.98
570.98
746.93
569.62
$7,049.58
0.21%
Flower & Decorations
669.03
835.44
114.79
591.77
507.76
80.12
1,063.45
496.81
386.10
348.25
255.97
321.75
$5,671.24
0.17%
Guest Supplies - F & B
1,853.42
1,768.94
1,758.42
2,030.68
2,618.88
2,646.66
3,287.18
2,862.61
1,960.76
2,266.48
2,211.38
2,056.24
$27,321.65
0.81%
Guest Supplies - Amenities
3,774.11
3,267.14
2,302.50
2,893.18
3,465.25
4,706.52
4,923.64
4,289.34
6,294.50
3,795.38
3,564.17
3,146.36
$46,422.10
1.37%
524.95
428.82
(76.12)
113.78
569.03
890.43
834.36
320.53
1,361.89
551.78
435.15
836.98
$6,791.57
0.20%
3,578.73
3,353.71
3,307.23
4,035.15
4,843.78
5,313.00
6,307.01
5,005.79
5,630.77
4,605.13
4,360.30
3,919.69
$54,260.29
1.60%
361.87
360.74
383.48
384.01
360.31
364.88
383.09
367.77
359.97
367.92
386.73
361.74
$4,442.49
0.13%
Printing & Stationery
1,132.69
1,136.84
1,101.48
1,137.57
1,693.84
1,397.94
1,929.05
1,853.35
2,277.12
1,378.54
1,411.59
1,437.46
$17,887.47
0.53%
Cleaning Supplies & Tools
1,521.84
1,489.94
1,452.48
1,598.45
2,195.18
2,020.74
2,626.22
2,354.40
1,088.17
1,891.84
1,880.31
1,832.26
$21,951.85
0.65%
Entertainment
1,671.88
1,470.33
2,434.81
1,937.67
1,804.79
1,397.83
2,149.47
2,387.38
207.69
1,753.67
2,402.20
2,071.10
$21,688.82
0.64%
472.10
387.72
635.26
638.19
441.14
507.31
633.14
533.08
423.86
534.28
652.93
470.10
$6,329.11
0.19%
1,021.84
989.94
452.48
848.45
1,445.18
1,520.74
1,126.22
1,354.40
1,088.17
1,891.84
1,880.31
1,832.26
$15,451.85
0.46%
193.94
159.28
260.97
262.17
181.22
208.40
260.09
218.99
174.12
219.48
268.23
193.12
$2,600.00
0.08%
istration & General
7,560.18
6,550.61
10,196.03
8,781.62
7,339.83
7,318.03
9,403.26
10,139.29
4,491.62
7,607.79
9,591.61
7,870.43
$96,850.27
2.86%
Human Resources
1,650.91
1,369.34
2,206.28
1,893.35
1,566.33
1,559.11
1,949.78
2,201.35
950.65
1,593.72
2,100.34
1,819.13
$20,860.30
0.62%
Sales & Marketing
6,980.17
6,820.66
7,682.28
7,350.93
6,995.86
6,983.66
7,499.89
7,681.00
6,264.44
7,150.01
7,702.12
7,199.22
$86,310.24
2.55%
P.O.M.E.C
21,888.00
19,706.39
24,273.37
22,720.16
24,899.02
25,957.27
30,433.83
31,363.97
22,046.48
23,159.12
26,362.42
24,314.27
$297,124.32
8.76%
Management Fees
11,225.11
9,952.46
11,831.75
11,543.21
14,076.06
15,026.07
17,729.37
18,236.86
13,192.61
12,085.93
13,545.64
13,065.34
$161,510.42
7.84%
Total Variable Costs
66,620.81
60,462.65
70,996.38
69,490.39
75,474.91
78,440.86
93,301.47
92,236.64
68,651.90
71,722.15
79,758.32
73,317.08
$900,523.57
26.56%
Income from Operations
63,336.72
55,597.87
29,152.15
65,062.14
121,216.61
139,250.66
161,994.06
160,209.89
146,935.63
73,095.38
63,399.21
89,882.45
1,169,132.76
34.49%
Guest Relocations Laundry Operation - Linen Laundry Uniform
Telephone & Fax Transportation Other Operating Supplies
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www.hotelskonsultan.webs.com Income from Operations Analysis 72.24%
73.26%
66.22%
71.59%
75.39%
76.06%
74.46%
74.55%
78.92%
71.84%
68.50%
73.17%
73.44%
152,310.24
150,194.87
166,154.27
153,696.84
145,940.11
144,651.22
147,767.33
147,582.94
139,424.27
153,152.19
160,629.89
150,381.28
1,797,952.05
53.04%
87,675.76
75,894.13
44,022.73
90,884.16
160,779.89
183,068.78
217,556.67
214,892.06
186,191.73
101,743.81
92,556.11
122,846.72
1,592,045.95
46.96%
6,200
5,200
6,200
6,000
6,200
6,000
6,200
6,200
6,000
6,200
6,000
6,200
72,600
2,660 $90.22
2,566 $88.09
2,479 $88.09
2,652 $84.79
3,581 $92.22
3,959 $85.64
4,198 $82.78
4,165 $87.02
3,984 $87.03
2,929 $81.73
2,874 $87.02
3,101 $88.08
39,148 86.00
Average Room Rate
$90.22
$88.09
$88.09
$84.79
$92.22
$85.64
$82.78
$87.02
$87.03
$81.73
$87.02
$88.08
$86.00
Breakeven Room Night
1,689 27.2%
1,705
1,887
1,813
1,583
1,690
1,786
1,696
1,602
1,874
1,846
1,708
20,907
32.8%
30.4%
30.2%
25.5%
28.2%
28.8%
27.4%
26.7%
30.2%
30.8%
27.5%
28.8%
Contribution Margin Break-Even Sales Volume Sales Volume Above BreakEven
Room Available Room Sold Average Room Rate Income from Operations Analysis
% Occupancy Breakeven
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www.hotelskonsultan.webs.com 4. TEST USE FORMULA A We do test the Classic Spread Sheet Break-even Point with the formula A as per page 1 with the formula as bellow: BE=FC/ (1-VC %) BE Break Even Point FC Fixed Costs VC Variable Costs
We do test for January 2009 for Room Division as follow: JANUARY 2009 BREAK-EVEN POINT: Fixed Cost: $110,028.47 VC%: 27.760290% Solution on Break-even point of January 2009 Room Division as bellow: BE = $110,028.47/(1-27.760290%) BE = $110,028.47/72.2397% BE = $110,028/0.722397 BE = $152,310.24 compare with Classic Spread Sheet is $ 152,310.24
We do test for Total 2009 for Room Division as follow: TOTAL 2009 BREAK-EVEN POINT: Fixed Cost: $1,320,341.69 VC%: 26.564132% Solution on Break-even point of Total 2009 Room Division as bellow: BE = $1,320,341.69/(1-26.564132%) BE = $1,320,341.69/73.4359% BE = $1,320.341.69/0.734359 BE = $1,797,952.28 compare with Classic Spread Sheet is $ 1,797,952.28
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www.hotelskonsultan.webs.com 5. TEST USE EQUATION The result of Classic Spread Sheet Break-even Point also can be proved by using “Equation Method” as following:
Sales = Variable Cost + Fixed Cost + Profit
To prove January 2009 Result of Classic Spread Sheet Break-even Point for Room Division: Information we got as follow: Average Room Rate = $90.22 Sales = $236,986 Room Sold = 2660 Fixed Cost = $110,028.47 Variable Cost = $66,620.81 Proved: Variable Cost per Occupied = $66,620.81 / 2660 = $ 25.045 $90.22Q = $25.045Q + $110,028.47 + $0 65.175Q = 110,028.47 Q = 1,688.21 ronded 1,689 R/N compare with Classic Spread Sheet BEP 1,689 R/N
You can do test the other months and in Yearly Total with this Equation Method
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www.hotelskonsultan.webs.com 6. BREAKEVEN CHART
This is Breakeven Chart for January 2009, you are free to do for another month within the Classic Spread Sheet Break-even Point:
Breakeven Chart
350,000.00 300,000.00
Money
250,000.00 200,000.00 150,000.00 100,000.00 50,000.00 -
Operating Surplus Variable Costs Fixed Costs Business Revenue Total Costs
(110,028.47)
563.00
1,126.00
1,689.00
2,252.00
2,815.00
3,378.00
(73,335.18)
(36,641.89)
51.40
36,744.69
73,437.98
110,131.27
-
14,100.57
28,201.14
42,301.71
56,402.28
70,502.85
84,603.42
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
-
50,793.86
101,587.72
152,381.58
203,175.44
253,969.30
304,763.16
110,028.47
124,129.04
138,229.61
152,330.18
166,430.75
180,531.32
194,631.89
Page:
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Room Sold
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Hotel F & B Division Break-even Point
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www.hotelskonsultan.webs.com 7. Hotel F & B Departmental Profit 1.1. Food and Beverage Payroll
Payroll in this Best Practice is Fixed Cost, in the Consuldated Food and Beverage Departmental Budget appear constant as Fixed Cost
1.2. Food and Beverage Cost of Sales
Cost of Sales – In Food and Beverage Departmental Profit has Cost of Sales but in the Room Departmental Profit is not, this expense in this Best Practice as Variable Cost
1.3. Provision of Food and Beverage
Provision in this Best Practice is Fixed Cost, but you can calculate this expenses by percentage of Sales and then become as Vaiable Cost
1.4. Other Expenses
Other Expenses in this Best Practice can be Fixed Cost or Variable Cost depend how you are calculated in the budget, when is constant every month will be Fixed Cost and when the expenses based on total sales or number of cover will categoried as Variable Cost
You are never can to compute by using formula directly without to identify the expenses caracter, because the Fixed Cost such as istration, Human Resources, Sales & Marketing and Property Operation & Energy Cost (P.O.M.E.C) share with Room Division and Other Operated Department. In this case you can splite based on Revenue percentage. Your operation Break-even Point will be wrong when you don’t split the above Expenses, also you will to find difficulties when you are not moving your expenses into the two categories expense i.e., Fixed Cost and Variable Cost. Do not confusing with Cost of Sales, because this expenses should be categoried by Variable Cost because these expenses will be increase or decrease paralel to the Food and Beverage Sales. to compute Break-even Point, you only need Fixed Cost and Variable Cost. The Cost of Sales is the presentation in the Profit and Loss format. So, to get the Calculation you can follow the steaps as bellow:
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www.hotelskonsultan.webs.com 8. Classic Spread Sheet Break-even Point Analysis The Classic Spread Sheet Break-even Point Analysis is the easier way to calculate Food and Beverage Divison Departmental Profit Break-even Point. This method can be prepared by following steps: a. STEP ONE Prepare Consulidated Operating Budget Summary and Monthly b. STEP TWO Move the expenses to Fixed Cost for constant expenses and move to Variable Cost for non constant expenses, all exepses calculated based on Number Guest, Number Cover or Percentage of Sales c. STEP THREE Calculate the Contribution Margin the simple formula as bellow: (S – VC)/S Sales – Variable Cost divided by Sales d. STEP FOUR Calculate the Break-even Sales Volume the simple formula as below: FC/CM Fixed Cost divided by Contribution Margin e. STEP FIVE Do calculation the Break-even Point Analysis by using the Classic Spread Sheet as sample f.
STEP SIX Do test with one of the formula as above or other furmula do you have
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www.hotelskonsultan.webs.com Example: MONTHLY BREAKDOWN OF CONSOLIDATED FOOD AND BEVERAGE DIVISION BUDGET Based on Proposed Budget 2009 BUDGET FOR 2009 - MONTH BY MONTH
Break-Even Analysis
Year 1
% of Sales
1/09
2/09
3/09
4/09
5/09
6/09
7/09
8/09
9/09
10/09
11/09
12/09
134,835.30
114,123.67
188,093.22
137,513.67
132,954.15
133,924.07
168,622.04
183,069.25
83,046.27
142,083.21
185,996.77
145,738.38
$1,750,000
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
$212,455
12.14%
Provision
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
$23,400
1.34%
istration & General
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
$76,809
4.39%
Human Resources
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
$12,152
0.69%
Sales & Marketing
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
$42,806
2.45%
P.O.M.E.C
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
$22,265
1.27%
Depreciation
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$244,920
14.00%
Total Fixed Costs
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$634,807
36.27%
Cost of Sales
38,790.29
32,757.48
53,989.27
39,020.77
38,162.44
38,440.86
48,400.38
52,547.25
23,837.18
40,782.81
53,387.56
41,831.97
$501,948
28.68%
Kitchen Fuel
1,884.84
1,431.42
2,479.78
2,068.20
1,642.43
1,968.57
2,430.12
2,318.75
1,303.33
1,960.72
2,530.50
1,879.23
$23,898
1.37%
460.58
581.27
750.80
242.32
676.75
326.70
406.91
778.86
115.88
547.76
723.95
736.41
$6,348
0.36%
2,666.00
2,064.00
3,400.00
3,234.00
2,390.00
2,671.00
3,409.00
3,247.00
1,926.00
2,793.00
3,495.00
2,725.00
$34,020
1.94%
609.66
599.64
986.39
547.69
718.46
582.85
751.41
1,015.01
271.23
639.35
900.37
715.96
$8,338
0.48%
1,153.04
954.07
1,622.75
1,195.61
1,112.18
1,173.34
1,466.74
1,570.56
711.03
1,202.41
1,595.00
1,211.65
$14,968
0.86%
Printing & Stationery
580.20
617.95
1,002.09
524.07
748.78
534.10
700.99
1,058.03
203.89
608.78
883.91
718.21
$8,181
0.47%
Decorations
172.41
112.18
201.41
225.44
124.61
186.89
226.40
175.83
139.19
178.21
219.85
156.89
$2,119
0.12%
Sales Fixed Costs Payroll
Variable Costs
Laundry Linen Music Entertainment Cleaning Supplies Guest Supplies F & B
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www.hotelskonsultan.webs.com Menu & Wine List
47.88
31.15
55.93
62.61
34.61
51.90
62.88
48.83
38.66
49.49
61.06
43.57
$589
0.03%
Spoilage
61.91
40.28
72.33
80.96
44.75
67.11
81.30
63.14
49.98
63.99
78.95
56.34
$761
0.04%
Telephone & Fax
86.28
56.14
100.79
112.81
62.36
93.52
113.29
87.99
69.66
89.18
110.02
78.51
$1,061
0.06%
Laundry Uniforms
663.54
675.88
1,097.12
633.44
808.57
625.28
810.81
1,146.99
263.57
697.86
987.64
792.23
$9,203
0.53%
F & B Promotions
208.79
135.85
243.91
273.01
150.91
226.32
274.17
212.93
168.57
215.81
266.24
189.99
$2,567
0.15%
21.01
13.67
24.55
27.47
15.19
22.78
27.59
21.43
16.96
21.72
26.79
19.12
$258
0.01%
106.90
69.55
124.88
139.78
77.26
115.88
140.38
109.02
86.31
110.50
136.32
97.28
$1,314
0.08%
Entertainment
61.88
40.26
72.28
80.91
44.72
67.07
81.25
63.10
49.96
63.96
78.90
56.31
$761
0.04%
Miscellaneous
75.49
49.07
87.90
98.40
54.72
80.98
98.30
76.42
60.26
77.47
95.81
67.81
$923
0.05%
3,904.43
3,383.04
5,265.71
4,535.24
3,790.63
3,779.38
4,856.29
5,236.41
2,319.68
3,929.02
4,953.56
4,064.66
$50,018
2.86%
Human Resources
852.61
707.19
1,139.43
977.82
808.92
805.20
1,006.96
1,136.88
490.96
823.07
1,084.71
939.49
$10,773
0.62%
Sales & Marketing
3,604.89
3,522.51
3,967.49
3,796.37
3,612.99
3,606.69
3,873.30
3,966.83
3,235.25
3,692.60
3,977.74
3,718.02
$44,575
2.55%
11,304.00
10,177.31
12,535.92
11,733.77
12,859.04
13,405.56
15,717.47
16,197.84
11,385.85
11,960.47
13,614.80
12,557.04
$153,449
8.77%
Total Variable Costs
$67,317
$58,020
$89,221
$69,611
$67,940
$68,832
$84,936
$91,079
$46,743
$70,508
$89,209
$72,656
$876,071
50.06%
Income from Operations
$14,618
$3,203
$45,972
$15,002
$12,113
$12,191
$30,786
$39,090
($16,598)
$18,674
$43,888
$20,182
$239,122
13.66%
Bar Supplies Banquet Expenses
istration & General
P.O.M.E.C
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www.hotelskonsultan.webs.com
Income from Operations Analysis Contribution Margin Break-Even Sales Volume Sales Volume Above Break-Even
Guest Cover Capture Rate
43.71%
50.38%
52.04%
50.15%
49.94%
$105,277
$121,015
$105,013
$101,659
$105,492
$1,271,170
72.64%
$77,792
($37,969)
$37,071
$84,338
$40,246
$478,830
27.36%
8,274
7,827
5,754
5,691
6,077
76,898
50.07%
49.16%
52.57%
49.38%
48.90%
48.60%
49.63%
50.25%
$105,643
$107,608
$100,637
$107,132
$108,182
$108,841
$106,591
$29,192
$6,516
$87,456
$30,382
$24,772
$25,083
$62,031
5,191
4,885
4,847
5,180
7,076
7,728
8,368
11,063
10,030
15,033
12,814
11,928
11,577
14,785
15,862
7,512
10,809
10,910
11,700
144,023
213.1%
205.3%
310.2%
247.4%
168.6%
149.8%
176.7%
191.7%
96.0%
187.9%
191.7%
192.5%
187.3%
$12.19
$11.38
$12.51
$10.73
$11.15
$11.57
$11.40
$11.54
$11.06
$13.14
$17.05
$12.46
$12.15
8,668
9,457
8,043
9,983
9,706
9,409
9,346
9,122
10,946
7,989
5,963
8,469
104,616
167.0%
193.6%
165.9%
192.7%
137.2%
121.7%
111.7%
110.2%
139.9%
138.8%
104.8%
139.4%
136.0%
Income from Operations Analysis Average Room Rate Breakeven Cover Breakeven Capture Rate
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www.hotelskonsultan.webs.com 9. TEST USE FORMULA A We do test the Classic Spread Sheet Break-even Point with the formula A as per page 1 with the formula as bellow: BE=FC/ (1-VC %) BE Break Even Point FC Fixed Costs VC Variable Costs
We do test for January 2009 Food and Beverage Division as follow: JANUARY 2009 BREAK-EVEN POINT: Fixed Cost: $52,900.58 VC%: 49.925% Solution on Break-even point of January 2009 Food and Beverage Division as bellow: BE = $52,900.58/(1-49.925%) BE = $52,900.58/50.07492% BE = $52,900/0.5007492 BE = $105,642.86 compare with Classic Spread Sheet is $ 105,642.86
We do test for Total 2009 as follow: TOTAL 2009 BREAK-EVEN POINT: Fixed Cost: $634,806.98 VC%: 50.061217% Solution on Break-even point of Total 2009 Food and Beverage Division as bellow: BE = $634,806.98/(1-50.0612%) BE = $634,806.98/49.938783% BE = $634,806.94/0.49938783 BE = $1,271,170.30 compare with Classic Spread Sheet is $ 1,271,170.29
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www.hotelskonsultan.webs.com 10. TEST USE EQUATION The result of Classic Spread Sheet Break-even Point also can be proved by using “Equation Method” as following:
Sales = Variable Cost + Fixed Cost + Profit
To prove January 2009 Result of Classic Spread Sheet Break-even Point: Information we got as follow: Average Per Cover = $12.19 Sales = $134,835.30 Cover = 11,063 Fixed Cost = $52,900.58 Variable Cost = $67,316.63 Proved: Variable Cost per Cover = $67,316.63 / 11,063 = $ 6.084844 $12.19Q = $6.085Q + $52,900.58 + $0 6.105Q = 52,900.58 Q = 8,665.12 ronded 8,666 Covers compare with Classic Spread Sheet BEP 8,668 Cover
You can do test the other months and in Yearly Total with this Equation Method
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www.hotelskonsultan.webs.com 11.
BREAKEVEN CHART FOR FOOD AND BEVERAGE DIVISION
Breakeven Chart
200,000.00
150,000.00
Money
100,000.00
50,000.00
-
(50,000.00)
(100,000.00)
Fixed Cost Variable Cost
2,167
4,334
6,501
8,668
10,835
13,002
52,900.58
52,900.58
52,900.58
52,900.58
52,900.58
52,900.58
52,900.58
-
13,185.86
26,371.71
39,557.57
52,743.43
65,929.29
79,115.14
Operating Surplus
(52,900.58)
(39,675.15)
(26,449.71)
(13,224.28)
1.15
13,226.59
26,452.02
Total Cost
52,900.58
66,086.44
79,272.30
92,458.15
105,644.01
118,829.87
132,015.72
-
26,411.29
52,822.58
79,233.87
105,645.16
132,056.45
158,467.74
Revenue
Cover Food and Beverage
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www.hotelskonsultan.webs.com
Hotel Minor Operated Department Break-even Point
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www.hotelskonsultan.webs.com 12. Hotel Minor Operated Departmental Profit 12.1 Minor Operated Department Payroll Payroll in this Best Practice is Fixed Cost, in the Consuldated Minor Operated Departmental Budget appear constant as Fixed Cost
12.2 Minor Operated Department Cost of Sales Cost of Sales – In Minor Operated Departmental Profit also has Cost of Sales but in the Room Departmental Profit is not, this expense in this Best Practice as Variable Cost
12.3 Provision of Minor Operated Department Provision in this Best Practice is Fixed Cost, but you can calculate this expenses by percentage of Sales and then become as Vaiable Cost
12.4 Other Expenses Other Expenses in this Best Practice can be Fixed Cost or Variable Cost depend how you are calculated in the budget, when is constant every month will be Fixed Cost and when the expenses based on total sales or number of cover will categoried as Variable Cost
You are never can to compute the Minor Operated Department by using formula directly without to identify the expenses caracter, because the Fixed Cost such as istration, Human Resources, Sales & Marketing and Property Operation & Energy Cost (P.O.M.E.C) share with Room Division and Food and Beverage Division. In this case you can splite based on Revenue percentage. Same with Room Division and Food Beverage Division, Other Operated Department Break-even Point will be wrong when you don’t split the above Expenses, also you will to find difficulties when you are not moving your expenses into the two categories expense i.e., Fixed Cost and Variable Cost. Again do not confusing with Cost of Sales, because this expenses should be categoried by Variable Cost because these expenses will be increase or decrease paralel to the Minor Operated Department Sales. to compute Break-even Point, you only need Fixed Cost and Variable Cost. The Cost of Sales is the presentation in the Profit and Loss format only.
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www.hotelskonsultan.webs.com 13. Classic Spread Sheet Break-even Point Analysis The Classic Spread Sheet Break-even Point Analysis is the easier way to calculate Minor Operated Departmental Profit Break-even Point. This method can be prepared by following steps: a. STEP ONE Prepare Consulidated Operating Budget Summary and Monthly b. STEP TWO Move the expenses to Fixed Cost for constant expenses and move to Variable Cost for non constant expenses, all exepses calculated based on Number Guest, Percentage of Sales c. STEP THREE Calculate the Contribution Margin the simple formula as bellow: (S – VC)/S Sales – Variable Cost divided by Sales d. STEP FOUR Calculate the Break-even Sales Volume the simple formula as below: FC/CM Fixed Cost divided by Contribution Margin e. STEP FIVE Do calculation the Break-even Point Analysis by using the Classic Spread Sheet as sample f.
STEP SIX Do test with one of the formula as above or other furmula do you have
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www.hotelskonsultan.webs.com Example: MONTHLY BREAKDOWN OF CONSOLIDATED MINOR OPERATED DEPARTMENT BUDGET Based on Proposed Budget 2009 BUDGET FOR 2009 - MONTH BY MONTH
Break-Even Analysis
Year 1
% of Sales
1/09
2/09
3/09
4/09
5/09
6/09
7/09
8/09
9/09
10/09
11/09
12/09
32,854.00
28,628.00
45,141.00
37,098.00
32,719.00
32,951.00
41,295.00
44,769.00
21,540.00
34,913.00
45,426.00
35,791.00
$433,125.00
Payroll
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
$94,787.97
21.88%
Provision
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
$14,352.00
3.31%
Cleaning Supplies
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
$300.00
0.07%
Guest Supplies FB
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
$900.00
0.21%
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
$19,080.00
4.41%
Human Resources
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
$3,018.58
0.70%
Sales & Marketing
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
$10,633.44
2.46%
P.O.M.E.C
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
$5,530.73
1.28%
Depreciation
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$60,840.00
14.05%
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
$209,442.71
48.36%
6,120.54
5,010.32
8,908.09
6,962.60
6,004.34
6,055.41
7,883.52
8,644.07
3,376.19
6,486.13
8,799.38
6,679.82
$80,930
18.69%
Laundry Uniforms
111.07
105.36
129.49
111.58
111.19
108.33
470.16
595.67
87.99
110.99
127.89
116.18
$2,186
0.50%
Telephone & Fax
44.34
42.10
49.95
46.03
44.10
44.20
47.88
49.41
38.81
45.07
49.73
45.46
$547
0.13%
Printing & Stationery
90.18
83.14
107.87
95.53
89.44
89.76
101.36
106.19
72.75
92.49
107.16
93.71
$1,130
0.26%
Sales Fixed Costs
istration & General
Total Fixed Costs Variable Costs Cost of Sales
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www.hotelskonsultan.webs.com Laundry Supplies
90.00
75.00
119.00
120.00
83.00
95.00
119.00
100.00
80.00
100.00
123.00
88.00
$1,192
0.28%
1,233.42
973.46
1,967.00
1,480.15
1,219.04
1,235.15
1,436.25
1,538.16
947.69
1,350.05
1,966.27
1,398.33
$16,745
3.87%
53.00
54.00
55.00
56.00
55.00
54.00
53.00
53.00
54.00
53.00
54.00
53.00
$647
0.15%
istration & General
969.89
840.37
1,308.04
1,126.59
941.62
938.83
1,206.34
1,300.76
576.23
976.00
1,230.50
1,009.69
$12,425
2.87%
Human Resources
211.79
175.67
283.04
242.90
200.94
200.02
250.14
282.41
121.96
204.46
269.45
233.38
$2,676
0.62%
Sales & Marketing
895.48
875.02
985.56
943.05
897.49
895.93
962.16
985.39
803.66
917.27
988.10
923.58
$11,073
2.56%
2,808.00
2,528.12
3,114.02
2,914.76
3,194.28
3,330.04
3,904.34
4,023.67
2,828.33
2,971.07
3,382.02
3,119.26
$38,118
8.80%
12,627.71
10,762.57
17,027.06
14,099.19
12,840.46
13,046.68
16,434.14
17,678.74
8,987.60
13,306.52
17,097.50
13,760.42
$167,668.60
38.71%
2,772.73
411.87
10,660.38
5,545.26
2,424.98
2,450.76
7,407.30
9,636.71
(4,901.16)
4,152.92
10,874.94
4,577.02
$56,013.69
12.93%
61.56%
62.41%
62.28%
61.99%
60.76%
60.41%
60.20%
60.51%
58.27%
61.89%
62.36%
61.55%
61.29%
28,350.20
27,968.01
28,024.21
28,153.28
28,727.62
28,893.84
28,991.15
28,843.51
29,950.43
28,202.48
27,987.56
28,355.14
$341,731.73
78.90%
4,503.80
659.99
17,116.79
8,944.72
3,991.38
4,057.16
12,303.85
15,925.49
(8,410.43)
6,710.52
17,438.44
7,435.86
$91,393.27
21.10%
5,191
4,885
4,847
5,180
7,076
7,728
8,368
8,274
7,827
5,754
5,691
6,077
76,898
$6.33
$5.86
$9.31
$7.16
$4.62
$4.26
$4.93
$5.41
$2.75
$6.07
$7.98
$5.89
$5.63
Laundry Operation Linen Miscellaneous
P.O.M.E.C
Total Variable Costs
Income from Operations
Income from Operations Analysis Contribution Margin Break-Even Sales Volume Sales Volume Above BreakEven
Guest Income from Operations Analysis Average Price for MOD Breakeven Guest Breakeven Capture Rate
4,479
4,772
3,009
3,931
6,213
6,776
5,875
5,331
10,883
4,648
3,506
4,814
60,672
86.3%
97.7%
62.1%
75.9%
87.8%
87.7%
70.2%
64.4%
139.1%
80.8%
61.6%
79.2%
78.9%
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www.hotelskonsultan.webs.com 14. TEST USE FORMULA A We do test the Classic Spread Sheet Break-even Point with the formula A as per page 1 with the formula as bellow: BE=FC/ (1-VC %) BE Break Even Point FC Fixed Costs VC Variable Costs
We do test for January 2009 Minor Operated Department as follow: JANUARY 2009 BREAK-EVEN POINT: Fixed Cost: $17,453.56 VC%: 38.43585% Solution on Break-even point of January 2009 Minor Operated Department as bellow: BE = $17,453.56/(1-38.43585%) BE = $17,453.56/61.56415% BE = $17.453.56/0.6156415 BE = $28,350.20 compare with Classic Spread Sheet is $ 28,350.20
We do test for Total 2009 Minor Operated Department as follow: TOTAL 2009 BREAK-EVEN POINT: Fixed Cost: $209,442.71 VC%: 38.711365% Solution on Break-even point of Total 2009 Minor Operated Department as bellow: BE = $209,442.71/(1-38.711365%) BE = $209,442.71/61.288634% BE = $209,442.71/0.61288634 BE = $341,731.73 compare with Classic Spread Sheet is $ 341,731.73
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www.hotelskonsultan.webs.com 15. TEST USE EQUATION The result of Classic Spread Sheet Break-even Point also can be proved by using “Equation Method” as following:
Sales = Variable Cost + Fixed Cost + Profit
To prove January 2009 Minor Operated Department Result of Classic Spread Sheet Break-even Point: Information we got as follow: Average Per Guest = $6.33 Sales = $32,854.00 No Of Guest = 5,191 Fixed Cost = $17,453.56 Variable Cost = $12,627.71 Proved: Variable Cost per Guest = $12,627.71 / 5,161 = $ 2.4326 $6.33Q = $2.4326Q + $17,453.56 + $0 3.8974Q = 17,453.56 Q = 4,478.26 ronded 4,479 Covers compare with Classic Spread Sheet BEP 4,479 Cover
You can do test the other months and in Yearly Total with this Equation Method
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www.hotelskonsultan.webs.com 16.
BREAKEVEN CHART FOR MINOR OPERATED DEPARTMENT
Breakeven Chart
50,000.00 40,000.00 30,000.00
Money
20,000.00 10,000.00 (10,000.00) (20,000.00) (30,000.00)
Fixed Cost Variable Cost
1,120
2,240
3,360
4,479
5,599
6,719
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
-
2,724.53
5,449.06
8,173.59
10,895.69
13,620.22
16,344.75
Operating Surplus
(17,453.56)
(13,089.58)
(8,725.59)
(4,361.61)
(1.52)
4,362.46
8,726.45
Total Cost
17,453.56
20,178.09
22,902.62
25,627.15
28,349.25
31,073.78
33,798.31
-
7,088.51
14,177.03
21,265.54
28,347.73
35,436.24
42,524.76
Revenue
Number Guest of Minor Operated Department
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www.hotelskonsultan.webs.com
Hotel Operation Break-even Point
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www.hotelskonsultan.webs.com 17. HOTEL OPERATION BREAK-EVEN PINT To compute Hotel Operation Break-event Point can do just added all Sales Volume Break-even Point or by using Break-even Analysis with Multiple Products as bellow:
Example Sales Break-even Point for January – December 2009 Description Room Division F & B Division Minor Op. Dept. Total Sales BEP
Jan-09 152,310.24 105,642.86 28,350.20 286,303.30
Feb-09 150,194.87 107,607.96 27,968.01 285,770.84
Mar-09 166,154.27 100,637.10 28,024.21 294,815.58
Apr-09 153,696.84 107,131.59 28,153.28 288,981.71
May-09 145,940.11 108,182.42 28,727.62 282,850.15
Jun-09 144,651.22 108,840.61 28,893.84 282,385.67
Description Room Division F & B Division Minor Op. Dept. Total Sales BEP
Jul-09 147,767.33 106,591.24 28,991.15 283,349.72
Aug-09 147,582.94 105,277.25 28,843.51 281,703.70
Sep-09 139,424.27 121,015.07 29,950.43 290,389.77
Oct-09 153,152.19 105,012.66 28,202.48 286,367.33
Nov-09 160,629.89 101,658.55 27,987.56 290,276.00
Dec-09 150,381.28 105,492.07 28,355.14 284,228.49
, the hotel operation is unique compare to manufactures or other business and we now about “Break-even Analysis with Multiple Products” is far different under than the above break-even point. Let we try to compute
HOTEL XYZOTEL XYZ Description Sales
Room Division
F & B Division
M.O. D
Total
239,986.00
100.0%
134,835.30
100.0%
32,854.00
100.0%
407,675.30
100.0%
66,620.81
27.8%
67,316.63
49.9%
12,627.71
38.4%
146,565.15
36.0%
Contribution Margin
173,365.19
72.2%
67,518.67
50.1%
20,226.29
61.6%
261,110.15
64.0%
Less Fixed Expenses
110,028.47
Less Variable Expenses
52,900.58
17,453.56
180,382.61
Net Operating Income
80,727.54
Computation of Break-even Point: Fixed Cost / Overall Contribution Margin 180,382.61 / 0.64 = 281,847.83 Different: 286,303.30 – 281,847.83 = 4,455.47 under than calculation
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www.hotelskonsultan.webs.com 18.
CONCLUTION:
18.1 Hotel Operation is unique The hotel operation is unique not like normal manufactures, there is many departmental profit that can be computed the break-even point. Those departmental profits has different characteristic of operations.
18.2 Computation Break-even Point of Hotel Because every departmental profit is different in operations also the expenses structures are different, so to calculate the break-even point is better use this example.
18.3 Common Formula used
Common Break-even formula still used to calculate departmental profits, but overall hotel operation will have big different.
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www.hotelskonsultan.webs.com GLOSSARY OF Break-even point
the break-even point is the point at which the supplier of a service or goods has covered all fixed and variable costs, to that point. After that point, the supplier can begin to make a profit, because the contribution is now to profit and not to fixed costs. For more detail see the toolkit on developing a financing strategy.
Contribution Margin
A cost ing concept that allows a company to determine the profitability of individual products. It is calculated as follows: Product Revenue - Product Variable Costs Product Revenue The phrase "contribution margin" can also refer to a per unit measure of a product's gross operating margin, calculated simply as the product's price minus its total variable costs..
Payroll
dependent upon usage, can mean a. the total amount of money paid in wages; b. a list of employees and their salaries; or, c. the department that determines the amounts of wage or salary due to each employee.
Consolidated Budget
is the budget that s for all operating s of a parent and all subsidiaries presented.
Fixed Cost
is operating expenses that are incurred to provide facilities and organization that are kept in readiness to do business without regard to actual volumes of production and sales. Fixed costs remain relatively constant until changed by managerial decision. Within general limits they do not vary with business volume. Examples of fixed costs consist of rent, property taxes, and interest expense.
Variable Cost
are those costs associated with production that changes directly with the amount of production, e.g., the direct material or labour required to complete the build or manufacturing of a product.
End of Best Practice of Hotel Room Division Departmental Profit See you for Best Practice of Hotel F & B Division Departmental Profit
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BEST PRACTICE HOTEL BREAK‐EVEN POINT Drs. Agusttinus Agus Purwanto, MM 2/11/2009
This document is prepared to analysis Budget Year 2009 being proposed to Hotel’s Owner, the objective to compute Break – even Point is to ensure the Monthly breakdown was objective and achievable. To see which month is bad performance and best performance. As Director of Finance will be assist Sales & Marketing to analyze by increasing and reducing the Room Rate when requested Developed by: Drs. Agustinus Agus Purwanto, MM
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Hotel Room Division Break-even Point
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www.hotelskonsultan.webs.com BEST PRACTICE HOTEL BREAK-EVENT POINT
1. Formula What is hotel break-even point computed by, the hotel is complex in business operation according to which Departmental Profit we want to compute the “Break-even Point” will meet the difficutly to follow “Break-Even Point” method as following without to know the caracteristic of expenses:
Formula A
BE=FC/ (1-VC %) BE Break Even Point FC Fixed Costs VC Variable Costs
Formula B
BEP = break-even point (units of production) TFC = total fixed costs, VCUP = variable costs per unit of production, SUP = selling price per unit of production
Formula C
1. Break-even point (in units) =
fixed expenses unit contribution margin 2. Contribution-margin ratio =
unit contribution margin unit sales price 3. Break-even point (in sales dollars) =
fixed expenses contribution-margin ratio Formula D
Classic Spread Sheet from Consolidated Budget
Other Formula
Still many other formulas like as Mathematic Equation etc.
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www.hotelskonsultan.webs.com 2. Hotel Departmental Profit In the hotel business has many types of Departmental Profit to follow Uniform System of for Hotel. These departmental profit can be minimized into three profit center as follow: a. Room Division Departmental Profit b. Food and Beverage Division Departmental Profit, and c. Other Operated Departmental Profit
2.1 Room Divison Departmental Profit
The main core business is services but is not really pure services business, because we also supply some operation supplies into the room for free to our guests. Cost and Expenses in the Room Divison Department ussualy categoried as follow: a. Payroll in this Best Practice is Fixed Cost, in the Consuldated Room Division Budget appear constant as Fixed Cost b. Provision in this Best Practice is Fixed Cost, but you can calculate this expenses by percentage of Sales and then become as Vaiable Cost c. Other Expenses in this Best Practice can be Fixed Cost or Variable Cost depend how you calculated in the budget, when is constant every month will be Fixed Cost and when the expenses based on the room occupancy, total sales or number of guest will categoried as Variable Cost If you are not following this method the Break – Even Point figures will be big differences when you are computing with another FORMULA.
2.2 Food and Beverage Division Departmental Profit
The main core business is not services, but combination between service and production / manufacturer, so you have to use different Formula to Food and Beverage Departmental Profit. Which will be analysis on the next Best Practice. Cost and Expenses in the Food and Beverage Departmental Profit different with Room Division Departmental Profit. This Cost and Expensres ussualy categoried as follow: a. Payroll in this Best Practice is Fixed Cost, in the Consuldated Food and Beverage Departmental Budget appear constant as Fixed Cost b. Cost of Sales – In Food and Beverage Departmental Profit has Cost of Sales but in the Room Departmental Profit is not, this expense in this Best Practice as Variable Cost c. Provision in this Best Practice is Fixed Cost, but you can calculate this expenses by percentage of Sales and then become as Vaiable Cost d. Other Expenses in this Best Practice can be Fixed Cost or Variable Cost depend how you calculated in the budget, when is constant every month will be Fixed Cost and when the expenses based on total sales or number of cover will categoried as Variable Cost
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www.hotelskonsultan.webs.com 2.3 Other Operated Departmental Profit The main core business is also not really service, this is combined between service and production, the formula can use the same with Food and Beverage Division Department Profit. When you are using Classic Spread Sheet Break-even Point Analysis will some expenses different classification. Mean in the Food and Beverage Departmental Profit as Variable Cost but in the Other Operated Departmental Profit as Fixed Cost.
3. Classic Spread Sheet Break-even Point Analysis for Room Division The Classic Spread Sheet Break-even Point Analysis is the easier way to calculate Room Divison Departmental Profit Break-even Point. This method can be prepared by following steps: a. STEP ONE Prepare Consulidated Operating Budget Summary and Monthly b. STEP TWO Move the expenses to Fixed Cost for constant expenses and move to Variable Cost for non constant expenses, all exepses calculated based on Occupied Room, Number Guest, Number Cover or Percentage of Sales c. STEP THREE Calculate the Contribution Margin the simple formula as bellow: (S – VC)/S Sales – Variable Cost divided by Sales d. STEP FOUR Calculate the Break-even Sales Volume the simple formula as below: FC/CM Fixed Cost divided by Contribution Margin e. STEP FIVE Do calculation the Break-even Point Analysis by using the Classic Spread Sheet as sample f.
STEP SIX Do test with one of the formula as above or other furmula do you have
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www.hotelskonsultan.webs.com Example: MONTHLY BREAKDOWN OF CONSOLIDATED ROOM DIVISION BUDGET Based on Proposed Budget 2009 BUDGET FOR 2009 - MONTH BY MONTH
Yearly Total
Break-Even Analysis
% of Sales
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
239,986.00
226,089.00
210,177.00
244,581.00
306,720.00
327,720.00
365,324.00
362,475.00
325,616.00
254,896.00
253,186.00
273,228.00
$3,389,998.00
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
19,718.37
$236,620.50
6.98%
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
1,550.00
$18,600.00
0.55%
In House Movie/Satellite TV
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
230.00
$2,760.00
0.08%
Music Entertainment
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
250.00
$3,000.00
0.09%
Reservation Expenses
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
$900.00
0.03%
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
266.67
$3,200.00
0.09%
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
12,393.85
$148,726.15
4.39%
Human Resources
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
1,960.78
$23,529.41
0.69%
Sales & Marketing
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
6,907.19
$82,886.30
2.45%
P.O.M.E.C
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
3,592.61
$43,111.33
1.27%
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
22,800.00
273,600.00
8.07%
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
764.00
$9,168.00
0.27%
Depreciation
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
39,520.00
$474,240.00
13.99%
Total Fixed Costs
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
$1,320,341.69
38.95%
Descriptions Sales
Nov-09
Dec-09
Fixed Costs Payroll Provision
Subscription - Newspaper istration & General
Interest Charges Other Fixed Charges
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www.hotelskonsultan.webs.com Variable Costs T/A Commission
540.06
414.36
678.90
730.06
471.44
542.16
762.40
569.70
452.98
570.98
746.93
569.62
$7,049.58
0.21%
Flower & Decorations
669.03
835.44
114.79
591.77
507.76
80.12
1,063.45
496.81
386.10
348.25
255.97
321.75
$5,671.24
0.17%
Guest Supplies - F & B
1,853.42
1,768.94
1,758.42
2,030.68
2,618.88
2,646.66
3,287.18
2,862.61
1,960.76
2,266.48
2,211.38
2,056.24
$27,321.65
0.81%
Guest Supplies - Amenities
3,774.11
3,267.14
2,302.50
2,893.18
3,465.25
4,706.52
4,923.64
4,289.34
6,294.50
3,795.38
3,564.17
3,146.36
$46,422.10
1.37%
524.95
428.82
(76.12)
113.78
569.03
890.43
834.36
320.53
1,361.89
551.78
435.15
836.98
$6,791.57
0.20%
3,578.73
3,353.71
3,307.23
4,035.15
4,843.78
5,313.00
6,307.01
5,005.79
5,630.77
4,605.13
4,360.30
3,919.69
$54,260.29
1.60%
361.87
360.74
383.48
384.01
360.31
364.88
383.09
367.77
359.97
367.92
386.73
361.74
$4,442.49
0.13%
Printing & Stationery
1,132.69
1,136.84
1,101.48
1,137.57
1,693.84
1,397.94
1,929.05
1,853.35
2,277.12
1,378.54
1,411.59
1,437.46
$17,887.47
0.53%
Cleaning Supplies & Tools
1,521.84
1,489.94
1,452.48
1,598.45
2,195.18
2,020.74
2,626.22
2,354.40
1,088.17
1,891.84
1,880.31
1,832.26
$21,951.85
0.65%
Entertainment
1,671.88
1,470.33
2,434.81
1,937.67
1,804.79
1,397.83
2,149.47
2,387.38
207.69
1,753.67
2,402.20
2,071.10
$21,688.82
0.64%
472.10
387.72
635.26
638.19
441.14
507.31
633.14
533.08
423.86
534.28
652.93
470.10
$6,329.11
0.19%
1,021.84
989.94
452.48
848.45
1,445.18
1,520.74
1,126.22
1,354.40
1,088.17
1,891.84
1,880.31
1,832.26
$15,451.85
0.46%
193.94
159.28
260.97
262.17
181.22
208.40
260.09
218.99
174.12
219.48
268.23
193.12
$2,600.00
0.08%
istration & General
7,560.18
6,550.61
10,196.03
8,781.62
7,339.83
7,318.03
9,403.26
10,139.29
4,491.62
7,607.79
9,591.61
7,870.43
$96,850.27
2.86%
Human Resources
1,650.91
1,369.34
2,206.28
1,893.35
1,566.33
1,559.11
1,949.78
2,201.35
950.65
1,593.72
2,100.34
1,819.13
$20,860.30
0.62%
Sales & Marketing
6,980.17
6,820.66
7,682.28
7,350.93
6,995.86
6,983.66
7,499.89
7,681.00
6,264.44
7,150.01
7,702.12
7,199.22
$86,310.24
2.55%
P.O.M.E.C
21,888.00
19,706.39
24,273.37
22,720.16
24,899.02
25,957.27
30,433.83
31,363.97
22,046.48
23,159.12
26,362.42
24,314.27
$297,124.32
8.76%
Management Fees
11,225.11
9,952.46
11,831.75
11,543.21
14,076.06
15,026.07
17,729.37
18,236.86
13,192.61
12,085.93
13,545.64
13,065.34
$161,510.42
7.84%
Total Variable Costs
66,620.81
60,462.65
70,996.38
69,490.39
75,474.91
78,440.86
93,301.47
92,236.64
68,651.90
71,722.15
79,758.32
73,317.08
$900,523.57
26.56%
Income from Operations
63,336.72
55,597.87
29,152.15
65,062.14
121,216.61
139,250.66
161,994.06
160,209.89
146,935.63
73,095.38
63,399.21
89,882.45
1,169,132.76
34.49%
Guest Relocations Laundry Operation - Linen Laundry Uniform
Telephone & Fax Transportation Other Operating Supplies
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www.hotelskonsultan.webs.com Income from Operations Analysis 72.24%
73.26%
66.22%
71.59%
75.39%
76.06%
74.46%
74.55%
78.92%
71.84%
68.50%
73.17%
73.44%
152,310.24
150,194.87
166,154.27
153,696.84
145,940.11
144,651.22
147,767.33
147,582.94
139,424.27
153,152.19
160,629.89
150,381.28
1,797,952.05
53.04%
87,675.76
75,894.13
44,022.73
90,884.16
160,779.89
183,068.78
217,556.67
214,892.06
186,191.73
101,743.81
92,556.11
122,846.72
1,592,045.95
46.96%
6,200
5,200
6,200
6,000
6,200
6,000
6,200
6,200
6,000
6,200
6,000
6,200
72,600
2,660 $90.22
2,566 $88.09
2,479 $88.09
2,652 $84.79
3,581 $92.22
3,959 $85.64
4,198 $82.78
4,165 $87.02
3,984 $87.03
2,929 $81.73
2,874 $87.02
3,101 $88.08
39,148 86.00
Average Room Rate
$90.22
$88.09
$88.09
$84.79
$92.22
$85.64
$82.78
$87.02
$87.03
$81.73
$87.02
$88.08
$86.00
Breakeven Room Night
1,689 27.2%
1,705
1,887
1,813
1,583
1,690
1,786
1,696
1,602
1,874
1,846
1,708
20,907
32.8%
30.4%
30.2%
25.5%
28.2%
28.8%
27.4%
26.7%
30.2%
30.8%
27.5%
28.8%
Contribution Margin Break-Even Sales Volume Sales Volume Above BreakEven
Room Available Room Sold Average Room Rate Income from Operations Analysis
% Occupancy Breakeven
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www.hotelskonsultan.webs.com 4. TEST USE FORMULA A We do test the Classic Spread Sheet Break-even Point with the formula A as per page 1 with the formula as bellow: BE=FC/ (1-VC %) BE Break Even Point FC Fixed Costs VC Variable Costs
We do test for January 2009 for Room Division as follow: JANUARY 2009 BREAK-EVEN POINT: Fixed Cost: $110,028.47 VC%: 27.760290% Solution on Break-even point of January 2009 Room Division as bellow: BE = $110,028.47/(1-27.760290%) BE = $110,028.47/72.2397% BE = $110,028/0.722397 BE = $152,310.24 compare with Classic Spread Sheet is $ 152,310.24
We do test for Total 2009 for Room Division as follow: TOTAL 2009 BREAK-EVEN POINT: Fixed Cost: $1,320,341.69 VC%: 26.564132% Solution on Break-even point of Total 2009 Room Division as bellow: BE = $1,320,341.69/(1-26.564132%) BE = $1,320,341.69/73.4359% BE = $1,320.341.69/0.734359 BE = $1,797,952.28 compare with Classic Spread Sheet is $ 1,797,952.28
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www.hotelskonsultan.webs.com 5. TEST USE EQUATION The result of Classic Spread Sheet Break-even Point also can be proved by using “Equation Method” as following:
Sales = Variable Cost + Fixed Cost + Profit
To prove January 2009 Result of Classic Spread Sheet Break-even Point for Room Division: Information we got as follow: Average Room Rate = $90.22 Sales = $236,986 Room Sold = 2660 Fixed Cost = $110,028.47 Variable Cost = $66,620.81 Proved: Variable Cost per Occupied = $66,620.81 / 2660 = $ 25.045 $90.22Q = $25.045Q + $110,028.47 + $0 65.175Q = 110,028.47 Q = 1,688.21 ronded 1,689 R/N compare with Classic Spread Sheet BEP 1,689 R/N
You can do test the other months and in Yearly Total with this Equation Method
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www.hotelskonsultan.webs.com 6. BREAKEVEN CHART
This is Breakeven Chart for January 2009, you are free to do for another month within the Classic Spread Sheet Break-even Point:
Breakeven Chart
350,000.00 300,000.00
Money
250,000.00 200,000.00 150,000.00 100,000.00 50,000.00 -
Operating Surplus Variable Costs Fixed Costs Business Revenue Total Costs
(110,028.47)
563.00
1,126.00
1,689.00
2,252.00
2,815.00
3,378.00
(73,335.18)
(36,641.89)
51.40
36,744.69
73,437.98
110,131.27
-
14,100.57
28,201.14
42,301.71
56,402.28
70,502.85
84,603.42
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
110,028.47
-
50,793.86
101,587.72
152,381.58
203,175.44
253,969.30
304,763.16
110,028.47
124,129.04
138,229.61
152,330.18
166,430.75
180,531.32
194,631.89
Page:
10
Room Sold
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Hotel F & B Division Break-even Point
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www.hotelskonsultan.webs.com 7. Hotel F & B Departmental Profit 1.1. Food and Beverage Payroll
Payroll in this Best Practice is Fixed Cost, in the Consuldated Food and Beverage Departmental Budget appear constant as Fixed Cost
1.2. Food and Beverage Cost of Sales
Cost of Sales – In Food and Beverage Departmental Profit has Cost of Sales but in the Room Departmental Profit is not, this expense in this Best Practice as Variable Cost
1.3. Provision of Food and Beverage
Provision in this Best Practice is Fixed Cost, but you can calculate this expenses by percentage of Sales and then become as Vaiable Cost
1.4. Other Expenses
Other Expenses in this Best Practice can be Fixed Cost or Variable Cost depend how you are calculated in the budget, when is constant every month will be Fixed Cost and when the expenses based on total sales or number of cover will categoried as Variable Cost
You are never can to compute by using formula directly without to identify the expenses caracter, because the Fixed Cost such as istration, Human Resources, Sales & Marketing and Property Operation & Energy Cost (P.O.M.E.C) share with Room Division and Other Operated Department. In this case you can splite based on Revenue percentage. Your operation Break-even Point will be wrong when you don’t split the above Expenses, also you will to find difficulties when you are not moving your expenses into the two categories expense i.e., Fixed Cost and Variable Cost. Do not confusing with Cost of Sales, because this expenses should be categoried by Variable Cost because these expenses will be increase or decrease paralel to the Food and Beverage Sales. to compute Break-even Point, you only need Fixed Cost and Variable Cost. The Cost of Sales is the presentation in the Profit and Loss format. So, to get the Calculation you can follow the steaps as bellow:
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www.hotelskonsultan.webs.com 8. Classic Spread Sheet Break-even Point Analysis The Classic Spread Sheet Break-even Point Analysis is the easier way to calculate Food and Beverage Divison Departmental Profit Break-even Point. This method can be prepared by following steps: a. STEP ONE Prepare Consulidated Operating Budget Summary and Monthly b. STEP TWO Move the expenses to Fixed Cost for constant expenses and move to Variable Cost for non constant expenses, all exepses calculated based on Number Guest, Number Cover or Percentage of Sales c. STEP THREE Calculate the Contribution Margin the simple formula as bellow: (S – VC)/S Sales – Variable Cost divided by Sales d. STEP FOUR Calculate the Break-even Sales Volume the simple formula as below: FC/CM Fixed Cost divided by Contribution Margin e. STEP FIVE Do calculation the Break-even Point Analysis by using the Classic Spread Sheet as sample f.
STEP SIX Do test with one of the formula as above or other furmula do you have
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www.hotelskonsultan.webs.com Example: MONTHLY BREAKDOWN OF CONSOLIDATED FOOD AND BEVERAGE DIVISION BUDGET Based on Proposed Budget 2009 BUDGET FOR 2009 - MONTH BY MONTH
Break-Even Analysis
Year 1
% of Sales
1/09
2/09
3/09
4/09
5/09
6/09
7/09
8/09
9/09
10/09
11/09
12/09
134,835.30
114,123.67
188,093.22
137,513.67
132,954.15
133,924.07
168,622.04
183,069.25
83,046.27
142,083.21
185,996.77
145,738.38
$1,750,000
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
17,704.57
$212,455
12.14%
Provision
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
1,950.00
$23,400
1.34%
istration & General
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
6,400.77
$76,809
4.39%
Human Resources
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
1,012.64
$12,152
0.69%
Sales & Marketing
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
3,567.20
$42,806
2.45%
P.O.M.E.C
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
1,855.39
$22,265
1.27%
Depreciation
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$20,410
$244,920
14.00%
Total Fixed Costs
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$52,901
$634,807
36.27%
Cost of Sales
38,790.29
32,757.48
53,989.27
39,020.77
38,162.44
38,440.86
48,400.38
52,547.25
23,837.18
40,782.81
53,387.56
41,831.97
$501,948
28.68%
Kitchen Fuel
1,884.84
1,431.42
2,479.78
2,068.20
1,642.43
1,968.57
2,430.12
2,318.75
1,303.33
1,960.72
2,530.50
1,879.23
$23,898
1.37%
460.58
581.27
750.80
242.32
676.75
326.70
406.91
778.86
115.88
547.76
723.95
736.41
$6,348
0.36%
2,666.00
2,064.00
3,400.00
3,234.00
2,390.00
2,671.00
3,409.00
3,247.00
1,926.00
2,793.00
3,495.00
2,725.00
$34,020
1.94%
609.66
599.64
986.39
547.69
718.46
582.85
751.41
1,015.01
271.23
639.35
900.37
715.96
$8,338
0.48%
1,153.04
954.07
1,622.75
1,195.61
1,112.18
1,173.34
1,466.74
1,570.56
711.03
1,202.41
1,595.00
1,211.65
$14,968
0.86%
Printing & Stationery
580.20
617.95
1,002.09
524.07
748.78
534.10
700.99
1,058.03
203.89
608.78
883.91
718.21
$8,181
0.47%
Decorations
172.41
112.18
201.41
225.44
124.61
186.89
226.40
175.83
139.19
178.21
219.85
156.89
$2,119
0.12%
Sales Fixed Costs Payroll
Variable Costs
Laundry Linen Music Entertainment Cleaning Supplies Guest Supplies F & B
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www.hotelskonsultan.webs.com Menu & Wine List
47.88
31.15
55.93
62.61
34.61
51.90
62.88
48.83
38.66
49.49
61.06
43.57
$589
0.03%
Spoilage
61.91
40.28
72.33
80.96
44.75
67.11
81.30
63.14
49.98
63.99
78.95
56.34
$761
0.04%
Telephone & Fax
86.28
56.14
100.79
112.81
62.36
93.52
113.29
87.99
69.66
89.18
110.02
78.51
$1,061
0.06%
Laundry Uniforms
663.54
675.88
1,097.12
633.44
808.57
625.28
810.81
1,146.99
263.57
697.86
987.64
792.23
$9,203
0.53%
F & B Promotions
208.79
135.85
243.91
273.01
150.91
226.32
274.17
212.93
168.57
215.81
266.24
189.99
$2,567
0.15%
21.01
13.67
24.55
27.47
15.19
22.78
27.59
21.43
16.96
21.72
26.79
19.12
$258
0.01%
106.90
69.55
124.88
139.78
77.26
115.88
140.38
109.02
86.31
110.50
136.32
97.28
$1,314
0.08%
Entertainment
61.88
40.26
72.28
80.91
44.72
67.07
81.25
63.10
49.96
63.96
78.90
56.31
$761
0.04%
Miscellaneous
75.49
49.07
87.90
98.40
54.72
80.98
98.30
76.42
60.26
77.47
95.81
67.81
$923
0.05%
3,904.43
3,383.04
5,265.71
4,535.24
3,790.63
3,779.38
4,856.29
5,236.41
2,319.68
3,929.02
4,953.56
4,064.66
$50,018
2.86%
Human Resources
852.61
707.19
1,139.43
977.82
808.92
805.20
1,006.96
1,136.88
490.96
823.07
1,084.71
939.49
$10,773
0.62%
Sales & Marketing
3,604.89
3,522.51
3,967.49
3,796.37
3,612.99
3,606.69
3,873.30
3,966.83
3,235.25
3,692.60
3,977.74
3,718.02
$44,575
2.55%
11,304.00
10,177.31
12,535.92
11,733.77
12,859.04
13,405.56
15,717.47
16,197.84
11,385.85
11,960.47
13,614.80
12,557.04
$153,449
8.77%
Total Variable Costs
$67,317
$58,020
$89,221
$69,611
$67,940
$68,832
$84,936
$91,079
$46,743
$70,508
$89,209
$72,656
$876,071
50.06%
Income from Operations
$14,618
$3,203
$45,972
$15,002
$12,113
$12,191
$30,786
$39,090
($16,598)
$18,674
$43,888
$20,182
$239,122
13.66%
Bar Supplies Banquet Expenses
istration & General
P.O.M.E.C
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Income from Operations Analysis Contribution Margin Break-Even Sales Volume Sales Volume Above Break-Even
Guest Cover Capture Rate
43.71%
50.38%
52.04%
50.15%
49.94%
$105,277
$121,015
$105,013
$101,659
$105,492
$1,271,170
72.64%
$77,792
($37,969)
$37,071
$84,338
$40,246
$478,830
27.36%
8,274
7,827
5,754
5,691
6,077
76,898
50.07%
49.16%
52.57%
49.38%
48.90%
48.60%
49.63%
50.25%
$105,643
$107,608
$100,637
$107,132
$108,182
$108,841
$106,591
$29,192
$6,516
$87,456
$30,382
$24,772
$25,083
$62,031
5,191
4,885
4,847
5,180
7,076
7,728
8,368
11,063
10,030
15,033
12,814
11,928
11,577
14,785
15,862
7,512
10,809
10,910
11,700
144,023
213.1%
205.3%
310.2%
247.4%
168.6%
149.8%
176.7%
191.7%
96.0%
187.9%
191.7%
192.5%
187.3%
$12.19
$11.38
$12.51
$10.73
$11.15
$11.57
$11.40
$11.54
$11.06
$13.14
$17.05
$12.46
$12.15
8,668
9,457
8,043
9,983
9,706
9,409
9,346
9,122
10,946
7,989
5,963
8,469
104,616
167.0%
193.6%
165.9%
192.7%
137.2%
121.7%
111.7%
110.2%
139.9%
138.8%
104.8%
139.4%
136.0%
Income from Operations Analysis Average Room Rate Breakeven Cover Breakeven Capture Rate
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www.hotelskonsultan.webs.com 9. TEST USE FORMULA A We do test the Classic Spread Sheet Break-even Point with the formula A as per page 1 with the formula as bellow: BE=FC/ (1-VC %) BE Break Even Point FC Fixed Costs VC Variable Costs
We do test for January 2009 Food and Beverage Division as follow: JANUARY 2009 BREAK-EVEN POINT: Fixed Cost: $52,900.58 VC%: 49.925% Solution on Break-even point of January 2009 Food and Beverage Division as bellow: BE = $52,900.58/(1-49.925%) BE = $52,900.58/50.07492% BE = $52,900/0.5007492 BE = $105,642.86 compare with Classic Spread Sheet is $ 105,642.86
We do test for Total 2009 as follow: TOTAL 2009 BREAK-EVEN POINT: Fixed Cost: $634,806.98 VC%: 50.061217% Solution on Break-even point of Total 2009 Food and Beverage Division as bellow: BE = $634,806.98/(1-50.0612%) BE = $634,806.98/49.938783% BE = $634,806.94/0.49938783 BE = $1,271,170.30 compare with Classic Spread Sheet is $ 1,271,170.29
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www.hotelskonsultan.webs.com 10. TEST USE EQUATION The result of Classic Spread Sheet Break-even Point also can be proved by using “Equation Method” as following:
Sales = Variable Cost + Fixed Cost + Profit
To prove January 2009 Result of Classic Spread Sheet Break-even Point: Information we got as follow: Average Per Cover = $12.19 Sales = $134,835.30 Cover = 11,063 Fixed Cost = $52,900.58 Variable Cost = $67,316.63 Proved: Variable Cost per Cover = $67,316.63 / 11,063 = $ 6.084844 $12.19Q = $6.085Q + $52,900.58 + $0 6.105Q = 52,900.58 Q = 8,665.12 ronded 8,666 Covers compare with Classic Spread Sheet BEP 8,668 Cover
You can do test the other months and in Yearly Total with this Equation Method
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www.hotelskonsultan.webs.com 11.
BREAKEVEN CHART FOR FOOD AND BEVERAGE DIVISION
Breakeven Chart
200,000.00
150,000.00
Money
100,000.00
50,000.00
-
(50,000.00)
(100,000.00)
Fixed Cost Variable Cost
2,167
4,334
6,501
8,668
10,835
13,002
52,900.58
52,900.58
52,900.58
52,900.58
52,900.58
52,900.58
52,900.58
-
13,185.86
26,371.71
39,557.57
52,743.43
65,929.29
79,115.14
Operating Surplus
(52,900.58)
(39,675.15)
(26,449.71)
(13,224.28)
1.15
13,226.59
26,452.02
Total Cost
52,900.58
66,086.44
79,272.30
92,458.15
105,644.01
118,829.87
132,015.72
-
26,411.29
52,822.58
79,233.87
105,645.16
132,056.45
158,467.74
Revenue
Cover Food and Beverage
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Hotel Minor Operated Department Break-even Point
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www.hotelskonsultan.webs.com 12. Hotel Minor Operated Departmental Profit 12.1 Minor Operated Department Payroll Payroll in this Best Practice is Fixed Cost, in the Consuldated Minor Operated Departmental Budget appear constant as Fixed Cost
12.2 Minor Operated Department Cost of Sales Cost of Sales – In Minor Operated Departmental Profit also has Cost of Sales but in the Room Departmental Profit is not, this expense in this Best Practice as Variable Cost
12.3 Provision of Minor Operated Department Provision in this Best Practice is Fixed Cost, but you can calculate this expenses by percentage of Sales and then become as Vaiable Cost
12.4 Other Expenses Other Expenses in this Best Practice can be Fixed Cost or Variable Cost depend how you are calculated in the budget, when is constant every month will be Fixed Cost and when the expenses based on total sales or number of cover will categoried as Variable Cost
You are never can to compute the Minor Operated Department by using formula directly without to identify the expenses caracter, because the Fixed Cost such as istration, Human Resources, Sales & Marketing and Property Operation & Energy Cost (P.O.M.E.C) share with Room Division and Food and Beverage Division. In this case you can splite based on Revenue percentage. Same with Room Division and Food Beverage Division, Other Operated Department Break-even Point will be wrong when you don’t split the above Expenses, also you will to find difficulties when you are not moving your expenses into the two categories expense i.e., Fixed Cost and Variable Cost. Again do not confusing with Cost of Sales, because this expenses should be categoried by Variable Cost because these expenses will be increase or decrease paralel to the Minor Operated Department Sales. to compute Break-even Point, you only need Fixed Cost and Variable Cost. The Cost of Sales is the presentation in the Profit and Loss format only.
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www.hotelskonsultan.webs.com 13. Classic Spread Sheet Break-even Point Analysis The Classic Spread Sheet Break-even Point Analysis is the easier way to calculate Minor Operated Departmental Profit Break-even Point. This method can be prepared by following steps: a. STEP ONE Prepare Consulidated Operating Budget Summary and Monthly b. STEP TWO Move the expenses to Fixed Cost for constant expenses and move to Variable Cost for non constant expenses, all exepses calculated based on Number Guest, Percentage of Sales c. STEP THREE Calculate the Contribution Margin the simple formula as bellow: (S – VC)/S Sales – Variable Cost divided by Sales d. STEP FOUR Calculate the Break-even Sales Volume the simple formula as below: FC/CM Fixed Cost divided by Contribution Margin e. STEP FIVE Do calculation the Break-even Point Analysis by using the Classic Spread Sheet as sample f.
STEP SIX Do test with one of the formula as above or other furmula do you have
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www.hotelskonsultan.webs.com Example: MONTHLY BREAKDOWN OF CONSOLIDATED MINOR OPERATED DEPARTMENT BUDGET Based on Proposed Budget 2009 BUDGET FOR 2009 - MONTH BY MONTH
Break-Even Analysis
Year 1
% of Sales
1/09
2/09
3/09
4/09
5/09
6/09
7/09
8/09
9/09
10/09
11/09
12/09
32,854.00
28,628.00
45,141.00
37,098.00
32,719.00
32,951.00
41,295.00
44,769.00
21,540.00
34,913.00
45,426.00
35,791.00
$433,125.00
Payroll
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
7,899.00
$94,787.97
21.88%
Provision
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
1,196.00
$14,352.00
3.31%
Cleaning Supplies
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
25.00
$300.00
0.07%
Guest Supplies FB
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
75.00
$900.00
0.21%
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
1,590.00
$19,080.00
4.41%
Human Resources
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
251.55
$3,018.58
0.70%
Sales & Marketing
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
886.12
$10,633.44
2.46%
P.O.M.E.C
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
460.89
$5,530.73
1.28%
Depreciation
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$5,070
$60,840.00
14.05%
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
$209,442.71
48.36%
6,120.54
5,010.32
8,908.09
6,962.60
6,004.34
6,055.41
7,883.52
8,644.07
3,376.19
6,486.13
8,799.38
6,679.82
$80,930
18.69%
Laundry Uniforms
111.07
105.36
129.49
111.58
111.19
108.33
470.16
595.67
87.99
110.99
127.89
116.18
$2,186
0.50%
Telephone & Fax
44.34
42.10
49.95
46.03
44.10
44.20
47.88
49.41
38.81
45.07
49.73
45.46
$547
0.13%
Printing & Stationery
90.18
83.14
107.87
95.53
89.44
89.76
101.36
106.19
72.75
92.49
107.16
93.71
$1,130
0.26%
Sales Fixed Costs
istration & General
Total Fixed Costs Variable Costs Cost of Sales
Developed by: Drs. Agustinus Agus Purwanto, MM
Page:
23
www.hotelskonsultan.webs.com Laundry Supplies
90.00
75.00
119.00
120.00
83.00
95.00
119.00
100.00
80.00
100.00
123.00
88.00
$1,192
0.28%
1,233.42
973.46
1,967.00
1,480.15
1,219.04
1,235.15
1,436.25
1,538.16
947.69
1,350.05
1,966.27
1,398.33
$16,745
3.87%
53.00
54.00
55.00
56.00
55.00
54.00
53.00
53.00
54.00
53.00
54.00
53.00
$647
0.15%
istration & General
969.89
840.37
1,308.04
1,126.59
941.62
938.83
1,206.34
1,300.76
576.23
976.00
1,230.50
1,009.69
$12,425
2.87%
Human Resources
211.79
175.67
283.04
242.90
200.94
200.02
250.14
282.41
121.96
204.46
269.45
233.38
$2,676
0.62%
Sales & Marketing
895.48
875.02
985.56
943.05
897.49
895.93
962.16
985.39
803.66
917.27
988.10
923.58
$11,073
2.56%
2,808.00
2,528.12
3,114.02
2,914.76
3,194.28
3,330.04
3,904.34
4,023.67
2,828.33
2,971.07
3,382.02
3,119.26
$38,118
8.80%
12,627.71
10,762.57
17,027.06
14,099.19
12,840.46
13,046.68
16,434.14
17,678.74
8,987.60
13,306.52
17,097.50
13,760.42
$167,668.60
38.71%
2,772.73
411.87
10,660.38
5,545.26
2,424.98
2,450.76
7,407.30
9,636.71
(4,901.16)
4,152.92
10,874.94
4,577.02
$56,013.69
12.93%
61.56%
62.41%
62.28%
61.99%
60.76%
60.41%
60.20%
60.51%
58.27%
61.89%
62.36%
61.55%
61.29%
28,350.20
27,968.01
28,024.21
28,153.28
28,727.62
28,893.84
28,991.15
28,843.51
29,950.43
28,202.48
27,987.56
28,355.14
$341,731.73
78.90%
4,503.80
659.99
17,116.79
8,944.72
3,991.38
4,057.16
12,303.85
15,925.49
(8,410.43)
6,710.52
17,438.44
7,435.86
$91,393.27
21.10%
5,191
4,885
4,847
5,180
7,076
7,728
8,368
8,274
7,827
5,754
5,691
6,077
76,898
$6.33
$5.86
$9.31
$7.16
$4.62
$4.26
$4.93
$5.41
$2.75
$6.07
$7.98
$5.89
$5.63
Laundry Operation Linen Miscellaneous
P.O.M.E.C
Total Variable Costs
Income from Operations
Income from Operations Analysis Contribution Margin Break-Even Sales Volume Sales Volume Above BreakEven
Guest Income from Operations Analysis Average Price for MOD Breakeven Guest Breakeven Capture Rate
4,479
4,772
3,009
3,931
6,213
6,776
5,875
5,331
10,883
4,648
3,506
4,814
60,672
86.3%
97.7%
62.1%
75.9%
87.8%
87.7%
70.2%
64.4%
139.1%
80.8%
61.6%
79.2%
78.9%
Developed by: Drs. Agustinus Agus Purwanto, MM
Page:
24
www.hotelskonsultan.webs.com 14. TEST USE FORMULA A We do test the Classic Spread Sheet Break-even Point with the formula A as per page 1 with the formula as bellow: BE=FC/ (1-VC %) BE Break Even Point FC Fixed Costs VC Variable Costs
We do test for January 2009 Minor Operated Department as follow: JANUARY 2009 BREAK-EVEN POINT: Fixed Cost: $17,453.56 VC%: 38.43585% Solution on Break-even point of January 2009 Minor Operated Department as bellow: BE = $17,453.56/(1-38.43585%) BE = $17,453.56/61.56415% BE = $17.453.56/0.6156415 BE = $28,350.20 compare with Classic Spread Sheet is $ 28,350.20
We do test for Total 2009 Minor Operated Department as follow: TOTAL 2009 BREAK-EVEN POINT: Fixed Cost: $209,442.71 VC%: 38.711365% Solution on Break-even point of Total 2009 Minor Operated Department as bellow: BE = $209,442.71/(1-38.711365%) BE = $209,442.71/61.288634% BE = $209,442.71/0.61288634 BE = $341,731.73 compare with Classic Spread Sheet is $ 341,731.73
Developed by: Drs. Agustinus Agus Purwanto, MM
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www.hotelskonsultan.webs.com 15. TEST USE EQUATION The result of Classic Spread Sheet Break-even Point also can be proved by using “Equation Method” as following:
Sales = Variable Cost + Fixed Cost + Profit
To prove January 2009 Minor Operated Department Result of Classic Spread Sheet Break-even Point: Information we got as follow: Average Per Guest = $6.33 Sales = $32,854.00 No Of Guest = 5,191 Fixed Cost = $17,453.56 Variable Cost = $12,627.71 Proved: Variable Cost per Guest = $12,627.71 / 5,161 = $ 2.4326 $6.33Q = $2.4326Q + $17,453.56 + $0 3.8974Q = 17,453.56 Q = 4,478.26 ronded 4,479 Covers compare with Classic Spread Sheet BEP 4,479 Cover
You can do test the other months and in Yearly Total with this Equation Method
Developed by: Drs. Agustinus Agus Purwanto, MM
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www.hotelskonsultan.webs.com 16.
BREAKEVEN CHART FOR MINOR OPERATED DEPARTMENT
Breakeven Chart
50,000.00 40,000.00 30,000.00
Money
20,000.00 10,000.00 (10,000.00) (20,000.00) (30,000.00)
Fixed Cost Variable Cost
1,120
2,240
3,360
4,479
5,599
6,719
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
17,453.56
-
2,724.53
5,449.06
8,173.59
10,895.69
13,620.22
16,344.75
Operating Surplus
(17,453.56)
(13,089.58)
(8,725.59)
(4,361.61)
(1.52)
4,362.46
8,726.45
Total Cost
17,453.56
20,178.09
22,902.62
25,627.15
28,349.25
31,073.78
33,798.31
-
7,088.51
14,177.03
21,265.54
28,347.73
35,436.24
42,524.76
Revenue
Number Guest of Minor Operated Department
Developed by: Drs. Agustinus Agus Purwanto, MM
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www.hotelskonsultan.webs.com
Hotel Operation Break-even Point
Developed by: Drs. Agustinus Agus Purwanto, MM
Page:
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www.hotelskonsultan.webs.com 17. HOTEL OPERATION BREAK-EVEN PINT To compute Hotel Operation Break-event Point can do just added all Sales Volume Break-even Point or by using Break-even Analysis with Multiple Products as bellow:
Example Sales Break-even Point for January – December 2009 Description Room Division F & B Division Minor Op. Dept. Total Sales BEP
Jan-09 152,310.24 105,642.86 28,350.20 286,303.30
Feb-09 150,194.87 107,607.96 27,968.01 285,770.84
Mar-09 166,154.27 100,637.10 28,024.21 294,815.58
Apr-09 153,696.84 107,131.59 28,153.28 288,981.71
May-09 145,940.11 108,182.42 28,727.62 282,850.15
Jun-09 144,651.22 108,840.61 28,893.84 282,385.67
Description Room Division F & B Division Minor Op. Dept. Total Sales BEP
Jul-09 147,767.33 106,591.24 28,991.15 283,349.72
Aug-09 147,582.94 105,277.25 28,843.51 281,703.70
Sep-09 139,424.27 121,015.07 29,950.43 290,389.77
Oct-09 153,152.19 105,012.66 28,202.48 286,367.33
Nov-09 160,629.89 101,658.55 27,987.56 290,276.00
Dec-09 150,381.28 105,492.07 28,355.14 284,228.49
, the hotel operation is unique compare to manufactures or other business and we now about “Break-even Analysis with Multiple Products” is far different under than the above break-even point. Let we try to compute
HOTEL XYZOTEL XYZ Description Sales
Room Division
F & B Division
M.O. D
Total
239,986.00
100.0%
134,835.30
100.0%
32,854.00
100.0%
407,675.30
100.0%
66,620.81
27.8%
67,316.63
49.9%
12,627.71
38.4%
146,565.15
36.0%
Contribution Margin
173,365.19
72.2%
67,518.67
50.1%
20,226.29
61.6%
261,110.15
64.0%
Less Fixed Expenses
110,028.47
Less Variable Expenses
52,900.58
17,453.56
180,382.61
Net Operating Income
80,727.54
Computation of Break-even Point: Fixed Cost / Overall Contribution Margin 180,382.61 / 0.64 = 281,847.83 Different: 286,303.30 – 281,847.83 = 4,455.47 under than calculation
Developed by: Drs. Agustinus Agus Purwanto, MM
Page:
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www.hotelskonsultan.webs.com 18.
CONCLUTION:
18.1 Hotel Operation is unique The hotel operation is unique not like normal manufactures, there is many departmental profit that can be computed the break-even point. Those departmental profits has different characteristic of operations.
18.2 Computation Break-even Point of Hotel Because every departmental profit is different in operations also the expenses structures are different, so to calculate the break-even point is better use this example.
18.3 Common Formula used
Common Break-even formula still used to calculate departmental profits, but overall hotel operation will have big different.
Developed by: Drs. Agustinus Agus Purwanto, MM
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www.hotelskonsultan.webs.com GLOSSARY OF Break-even point
the break-even point is the point at which the supplier of a service or goods has covered all fixed and variable costs, to that point. After that point, the supplier can begin to make a profit, because the contribution is now to profit and not to fixed costs. For more detail see the toolkit on developing a financing strategy.
Contribution Margin
A cost ing concept that allows a company to determine the profitability of individual products. It is calculated as follows: Product Revenue - Product Variable Costs Product Revenue The phrase "contribution margin" can also refer to a per unit measure of a product's gross operating margin, calculated simply as the product's price minus its total variable costs..
Payroll
dependent upon usage, can mean a. the total amount of money paid in wages; b. a list of employees and their salaries; or, c. the department that determines the amounts of wage or salary due to each employee.
Consolidated Budget
is the budget that s for all operating s of a parent and all subsidiaries presented.
Fixed Cost
is operating expenses that are incurred to provide facilities and organization that are kept in readiness to do business without regard to actual volumes of production and sales. Fixed costs remain relatively constant until changed by managerial decision. Within general limits they do not vary with business volume. Examples of fixed costs consist of rent, property taxes, and interest expense.
Variable Cost
are those costs associated with production that changes directly with the amount of production, e.g., the direct material or labour required to complete the build or manufacturing of a product.
End of Best Practice of Hotel Room Division Departmental Profit See you for Best Practice of Hotel F & B Division Departmental Profit
Developed by: Drs. Agustinus Agus Purwanto, MM
Page:
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