Week 8 EOC: Chapter 8 Quiz, Question 4

a. What were the total revenues in October 2009 and October 2010?

b. What was the GOP in dollars in October 2009 and October 2010?

c. What was the percentage of GOP to total revenues in October 2009 and October 2010?

d. What was the flow-through percentage achieved by Santi’s hotel? What is your assessment of that percentage?

Answers:

 

a.    The total revenues in October 2009 was 545,000 and October 2010 was 583,000. 

b.  The GOP in October 2009 was $162,000 and in October 2010 was 184,550

c.    The GOP in total revenues % in October 2009 was 29.72 and in 2010 was 31.66%

d.  The flow-through % was 59.34%. In my opinion that percentage, is slightly high which is great for the business. "Flow-through is a measure of the ability of a hotel to convert increased revenue dollars to increased gross operating profit dollars" (Dopson, Lea R. Managerial Accounting for the Hospitality Industry. Wiley, 09/2008. [The Art Institutes]). This number shows the movement of products and how well the business can generate revenue for the business. "Gross operating profit (GOP) is, in effect, total hotel revenue less those expenses that are considered directly controllable by management. Flow-through was created by managerial accountants to measure the ability of a hotel to convert increases in revenue directly to increases in GOP" (Dopson, Lea R. Managerial Accounting for the Hospitality Industry. Wiley, 09/2008. [The Art Institutes]). With the flow-through percentage it its important to remember that these numbers help the mangers with the business, this number 59.34% shows, "flow-through is computed to help managers identify the impact of increases in revenue on profitability. When it is high (over 50%), it usually reflects efficiency on the part of management in converting additional revenues into additional profits" (Dopson, Lea R. Managerial Accounting for the Hospitality Industry. Wiley, 09/2008. [The Art Institutes]).