The managers of Vernon Cabins are considering different pricing strategies for year 2. Under the first strategy ("High Price"), they will work to maintain an average price of $260 per night. They realize that this will reduce demand and estimate that the occupancy rate will fall to 65 percent with this strategy. Under the alternative strategy ("High Occupancy"), they will work to maintain the year 1 occupancy rate of 80% by lowering the average price to $215 per night. Under either strategy, Vernon Cabins will close one of the properties. Required: a. Prepare a budgeted income statement for year 2 if the "High Price" strategy is adopted. b. Prepare a budgeted income statement for year 2 if the "High Occupancy" strategy is adopted. c. Which is the correct pricing strategy for year 2. Complete this question by entering your answers in the tabs below. Required A Required B Required C Prepare a budgeted income statement for year 2 if the High Price strategy is adopted. Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar. Vernon Cabins Budgeted Operating Income Year 2 Sales revenue Lodging Incidentals Forfeited deposits Total revenues Costs Labor Incidentals Miscellaneous Utilities, etc. Depreciation Management Marketing Property taxes Total costs Operating profit 5 0 A 0 0
The managers of Vernon Cabins are considering different pricing strategies for year 2. Under the first strategy ("High Price"), they will work to maintain an average price of $260 per night. They realize that this will reduce demand and estimate that the occupancy rate will fall to 65 percent with this strategy. Under the alternative strategy ("High Occupancy"), they will work to maintain the year 1 occupancy rate of 80% by lowering the average price to $215 per night. Under either strategy, Vernon Cabins will close one of the properties. Required: a. Prepare a budgeted income statement for year 2 if the "High Price" strategy is adopted. b. Prepare a budgeted income statement for year 2 if the "High Occupancy" strategy is adopted. c. Which is the correct pricing strategy for year 2. Complete this question by entering your answers in the tabs below. Required A Required B Required C Prepare a budgeted income statement for year 2 if the High Price strategy is adopted. Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar. Vernon Cabins Budgeted Operating Income Year 2 Sales revenue Lodging Incidentals Forfeited deposits Total revenues Costs Labor Incidentals Miscellaneous Utilities, etc. Depreciation Management Marketing Property taxes Total costs Operating profit 5 0 A 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:The managers of Vernon Cabins are considering different pricing strategies for year 2. Under the first strategy ("High Price"), they will
work to maintain an average price of $260 per night. They realize that this will reduce demand and estimate that the occupancy rate
will fall to 65 percent with this strategy. Under the alternative strategy ("High Occupancy"), they will work to maintain the year 1
occupancy rate of 80% by lowering the average price to $215 per night. Under either strategy, Vernon Cabins will close one of the
properties.
Required:
a. Prepare a budgeted income statement for year 2 if the "High Price" strategy is adopted.
b. Prepare a budgeted income statement for year 2 if the "High Occupancy" strategy is adopted.
c. Which is the correct pricing strategy for year 2.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Prepare a budgeted income statement for year 2 if the High Price strategy is adopted.
Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar.
Vernon Cabins
Budgeted Operating Income
Year 2
Sales revenue
Lodging
Incidentals
Forfeited deposits
Total revenues
Costs
Labor
Incidentals
Miscellaneous
Utilities, etc.
Depreciation
Management
Marketing
Property taxes
Total costs
Operating profit
5
0
A
0
0
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