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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

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Break-even Point

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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

Budget

## Other Formula Still many other formulas like as

Mathematic Equation etc.

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2. Hotel Departmental Profit

In the hotel business has many types of Departmental Profit to follow Uniform System of
Account 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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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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Example: MONTHLY BREAKDOWN OF CONSOLIDATED ROOM DIVISION BUDGET
Based on Proposed Budget 2009
BUDGET FOR 2009 - MONTH BY MONTH

Yearly Total
% of
Break-Even Analysis Sales
Descriptions Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

Sales 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

Fixed Costs

Payroll 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%

Provision 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%

Subscription - Newspaper 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%

Administration & General 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%

Interest Charges 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%

Other Fixed Charges 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%

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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%

Guest Relocations 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%

Laundry Operation - Linen 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%

Laundry Uniform 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%

Telephone & Fax 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%

Transportation 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%

Other Operating Supplies 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%

Administration & 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%

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Income from Operations
Analysis
Contribution Margin 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%

Break-Even Sales Volume 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%
Sales Volume Above Break-
Even
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%

Room Available 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

Room Sold 2,660 2,566 2,479 2,652 3,581 3,959 4,198 4,165 3,984 2,929 2,874 3,101 39,148
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

## Income from Operations

Analysis
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

1,705 1,887 1,813 1,583 1,690 1,786 1,696 1,602 1,874 1,846 1,708 20,907
Breakeven Room Night 1,689
% Occupancy Breakeven 27.2% 32.8% 30.4% 30.2% 25.5% 28.2% 28.8% 27.4% 26.7% 30.2% 30.8% 27.5% 28.8%

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## 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

## 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

## 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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## 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:

## 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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6. BREAKEVEN CHART

This is Breakeven Chart for January 2009, you are free to do for another month within the

Breakeven Chart

350,000.00

300,000.00

250,000.00
Money

200,000.00

150,000.00

100,000.00

50,000.00

-
- 563.00 1,126.00 1,689.00 2,252.00 2,815.00 3,378.00
Operating Surplus (110,028.47) (73,335.18) (36,641.89) 51.40 36,744.69 73,437.98 110,131.27
Variable Costs - 14,100.57 28,201.14 42,301.71 56,402.28 70,502.85 84,603.42
Fixed Costs 110,028.47 110,028.47 110,028.47 110,028.47 110,028.47 110,028.47 110,028.47
Business Revenue - 50,793.86 101,587.72 152,381.58 203,175.44 253,969.30 304,763.16
Total Costs 110,028.47 124,129.04 138,229.61 152,330.18 166,430.75 180,531.32 194,631.89
Room Sold

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Break-even Point

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## 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 Administration, 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.

Remember 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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## 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

## Developed by: Drs. Agustinus Agus Purwanto, MM Page: 13

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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
1/09 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/09 11/09 12/09 Sales

Sales 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
Fixed Costs

Payroll 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%

Administration & 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%
Variable Costs

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%

Laundry Linen 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%

Music Entertainment 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%

Cleaning Supplies 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%

Guest Supplies F & B 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%

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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%

Bar Supplies 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%

Banquet Expenses 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%

Administration & General 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%

P.O.M.E.C 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%

## Developed by: Drs. Agustinus Agus Purwanto, MM Page: 15

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## Income from Operations Analysis

Contribution Margin 50.07% 49.16% 52.57% 49.38% 48.90% 48.60% 49.63% 50.25% 43.71% 50.38% 52.04% 50.15% 49.94%
Break-Even Sales Volume \$105,643 \$107,608 \$100,637 \$107,132 \$108,182 \$108,841 \$106,591 \$105,277 \$121,015 \$105,013 \$101,659 \$105,492 \$1,271,170 72.64%
Sales Volume Above Break-Even \$29,192 \$6,516 \$87,456 \$30,382 \$24,772 \$25,083 \$62,031 \$77,792 (\$37,969) \$37,071 \$84,338 \$40,246 \$478,830 27.36%

Guest 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

Cover 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
Capture Rate 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%

## Income from Operations Analysis

Average Room Rate \$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

Breakeven Cover 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
Breakeven Capture Rate 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%

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## 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

## 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

## 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

## Developed by: Drs. Agustinus Agus Purwanto, MM Page: 17

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## 10. TEST USE EQUATION

The result of Classic Spread Sheet Break-even Point also can be proved by using “Equation
Method” as following:

## 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

## Developed by: Drs. Agustinus Agus Purwanto, MM Page: 18

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## 11. BREAKEVEN CHART FOR FOOD AND BEVERAGE DIVISION

Breakeven Chart

200,000.00

150,000.00

100,000.00
Money

50,000.00

(50,000.00)

(100,000.00)
- 2,167 4,334 6,501 8,668 10,835 13,002
Fixed Cost 52,900.58 52,900.58 52,900.58 52,900.58 52,900.58 52,900.58 52,900.58
Variable Cost - 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
Revenue - 26,411.29 52,822.58 79,233.87 105,645.16 132,056.45 158,467.74
Cover Food and Beverage

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Department
Break-even Point

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## 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 Administration, 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.

Remember 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.

## Developed by: Drs. Agustinus Agus Purwanto, MM Page: 21

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## 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

## Developed by: Drs. Agustinus Agus Purwanto, MM Page: 22

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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
1/09 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/09 11/09 12/09 Sales

Sales 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
Fixed Costs

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%

Administration & General 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%

Total Fixed Costs 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%
Variable Costs

Cost of Sales 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%

## Developed by: Drs. Agustinus Agus Purwanto, MM Page: 23

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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%

Laundry Operation Linen 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%

Miscellaneous 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%

Administration & 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%

P.O.M.E.C 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%

Total Variable Costs 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%

Income from Operations 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%

## Income from Operations Analysis

Contribution Margin 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%
Break-Even Sales Volume 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%
Sales Volume Above Break-
Even 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%

Guest 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

## Income from Operations Analysis

Average Price for MOD \$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

Breakeven Guest 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
Breakeven Capture Rate 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

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## 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

## 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

## 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 Page: 25

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## 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:

## 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 Page: 26

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## 16. BREAKEVEN CHART FOR MINOR OPERATED DEPARTMENT

Breakeven Chart

50,000.00

40,000.00

30,000.00

20,000.00
Money

10,000.00

(10,000.00)

(20,000.00)

(30,000.00)
- 1,120 2,240 3,360 4,479 5,599 6,719
Fixed Cost 17,453.56 17,453.56 17,453.56 17,453.56 17,453.56 17,453.56 17,453.56
Variable Cost - 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
Revenue - 7,088.51 14,177.03 21,265.54 28,347.73 35,436.24 42,524.76
Number Guest of Minor Operated Department

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Hotel Operation
Break-even Point

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## 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:

## Description Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09

Room Division 152,310.24 150,194.87 166,154.27 153,696.84 145,940.11 144,651.22
F & B Division 105,642.86 107,607.96 100,637.10 107,131.59 108,182.42 108,840.61
Minor Op. Dept. 28,350.20 27,968.01 28,024.21 28,153.28 28,727.62 28,893.84
Total Sales BEP 286,303.30 285,770.84 294,815.58 288,981.71 282,850.15 282,385.67

## Description Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

Room Division 147,767.33 147,582.94 139,424.27 153,152.19 160,629.89 150,381.28
F & B Division 106,591.24 105,277.25 121,015.07 105,012.66 101,658.55 105,492.07
Minor Op. Dept. 28,991.15 28,843.51 29,950.43 28,202.48 27,987.56 28,355.14
Total Sales BEP 283,349.72 281,703.70 290,389.77 286,367.33 290,276.00 284,228.49

Remember, 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

## Sales 239,986.00 100.0% 134,835.30 100.0% 32,854.00 100.0% 407,675.30 100.0%

Less Variable Expenses 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%

## Computation of Break-even Point:

Fixed Cost / Overall Contribution Margin

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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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GLOSSARY OF TERMS
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 accounting concept that allows a company to determine the
profitability of individual products.

It is calculated as follows:

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 accounts for all operating accounts of a parent
and all subsidiaries presented.

Fixed Cost is operating expenses that are incurred to provide facilities and
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