A company is preparing its cash budget. Its cash balance on January 1 is $290,000, and it has a minimum cash requirement of $340,000. The following data have been provided:
-Pelican Roost Hotel has 100 rooms. For a normal February, it averages 60% capacity. However, there are three 3-day events scheduled for February in which the hotel expects to be completely booked. Of the additional guests coming for the events, one-half will likely attach an extra day before or after the event to enjoy the beach and/or other local sights. You have determined that the housekeeping staff requires 30 minutes to clean each occupied room. The housekeeping staff is paid $14 per hour. The housekeeping labor cost is fully variable to the number of occupied rooms. Assuming it is not a leap year, the total housekeeping budget for February is

Question

A company is preparing its cash budget. Its cash balance on January 1 is $290,000, and it has a minimum cash requirement of $340,000. The following data have been provided:  ​
-Pelican Roost Hotel has 100 rooms. For a normal February, it averages 60% capacity. However, there are three 3-day events scheduled for February in which the hotel expects to be completely booked. Of the additional guests coming for the events, one-half will likely attach an extra day before or after the event to enjoy the beach and/or other local sights. You have determined that the housekeeping staff requires 30 minutes to clean each occupied room. The housekeeping staff is paid $14 per hour. The housekeeping labor cost is fully variable to the number of occupied rooms. Assuming it is not a leap year, the total housekeeping budget for February is

Quizplus · Accepted Answer

The hotel has 100 rooms and February has 28 days. Normally, the hotel operates at 60% capacity, so for 25 days (28 days - 3 event days), the occupancy is 60 rooms per day. For the 3 event days, the hotel is fully booked at 100 rooms. Additionally, half of the guests from the events will stay an extra day, adding 50 extra room nights (3 days * 50 rooms). Total room nights = (25 days * 60 rooms) + (3 days * 100 rooms) + 50 extra room nights = 1,500 + 300 + 50 = 1,850 room nights. Housekeeping requires 30 minutes per room, so total hours = 1,850 * 0.5 = 925 hours. At $14 per hour, the total cost is 925 * $14 = $12,950. However, the correct choice is $14,700, indicating a calculation error or additional context not considered.

A Company Is Preparing Its Cash Budget