27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Direct labor budget for a service business

Ambassador Suites Inc. operates a downtown hotel property that has 300 rooms. On average, 80% of Ambassador Suites' rooms are occupied on weekdays and 40% are occupied during the weekend. The manager has asked you to develop a direct labor budget for the housekeeping and restaurant staff for weekdays and weekends. 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. The restaurant has six full-time staff (eight-hour day) on duty, regardless of occupancy. However, for every 60 occupied rooms, an additional person is brought in to work in the restaurant for the eight-hour day. The restaurant staff is paid $12 per hour.

Determine the estimated housekeeping, restaurant, and total direct labor cost for an average weekday and average weekend day. Format the budget in two columns, labeled as weekday and weekend day.

To determine

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.

To Prepare: The direct labor cost budget of Company A.


The following table shows the direct labor cost budget for weekday and weekend day.

Company A
Direct Labor Cost Budget
For a weekday or a weekend day
Particulars Weekday Weekend Day
Room occupancy
Room capacity 300 300
Occupied percent (occupancy) 80% 40%
Rooms occupied (a) 240 120
Number of minutes to clean a room (b) 30 30
Total minutes (c)=(a) × (b) 7,200 3,600
Total hours (d) =(c)/ 60 minutes 120 60

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