Buenos Dias plc is a Spanish hotel group operating across Western Europe. It provides economy-class
hotels close to major roads.
You are provided with the following information:
x All hotels have 80 bedrooms, with double beds, and operate for 365 days per year.
x Sales volume is measured in room nights. Guests are charged per room per night (regardless of
single or double occupancy), including buffet breakfast.
x A light bites and beverages menu is offered 14.00 – 22.00 each day.
The first Buenos Dias hotel in the UK opened in April 2017, near Exeter Junction 31 of the M5 (see
Appendix I). This location was chosen as it is at a major point in the UK road network connecting visitors
to key tourist locations in Devon and Cornwall (via the A30 and A38).
Reviews are being undertaken on cost performance, pricing, operational management, and longer-term
proposals. For ease of analysis, 30-day months are assumed.
You are a management consultant providing evaluations and recommendations on elements of this review
to the Exeter hotel manager, or Buenos Dias Head Office, as specified.
BEAM045 Individual Assessment – Client Brief
BEAM045 3
SECTION A – QUESTION 1
THIS IS A COMPULSORY REQUIREMENT
LONG-TERM CAPITAL INVESTMENT
A draft proposal has been prepared by the Exeter hotel manager to expand and upgrade the existing
kitchen facilities, in order to increase both its serving capacity and food offerings to include cooked meals
at breakfast and evenings.
An alternative proposal is to close the restaurant and transform the space into a facility for meetings and
conferences.

If there is investment in the expansion and upgrade, the additional cash costs and revenues are
estimated to be as follows:
Year 0 1 2 3 4
Investment Cash flows £ (£200,000)
Revenue Cash Flows £ £130,000 £140,000 £150,000 £160,000
Cost Cash Flows (55%) £ £70,000 £75,000 £80,000 £90,000
Net Cash Flows (£200,000) £60,000 £65,000 £70,000 £70,000
Additional Meals 6,500 7,000 7,500 8,000
All Buenos Dias projects have a cost of capital requirement of 11% and are evaluated on a 4-year basis.
The internal return of the project has been calculated as approximately 12%.
Financing of proposals under €250,000 are the responsibility of individual hotels.
Requirement: Section A of your report – to the Exeter hotel manager
Make a recommendation on proceeding with the proposal, highlighting any points to support
your advice, or are recommended for query / further consideration before a final decision.
25 Marks
Discount Rates and Factors:
0 1 2 3 4
10% 1.000 0.909 0.826 0.751 0.683
11% 1.000 0.901 0.812 0.731 0.659
12% 1.000 0.893 0.797 0.712 0.636
13% 1.000 0.885 0.783 0.693 0.613
14% 1.000 0.877 0.769 0.675 0.592
15% 1.000 0.870 0.756 0.658 0.572
BEAM045 Individual Assessment – Client Brief
BEAM045 4
SECTION B – QUESTION 2
THIS IS A COMPULSORY REQUIREMENT
BUDGETING & PLANNING
A cost performance report for the Exeter hotel for the three months ending 30 November 2021 shows:
Budget Actual
£ £
Food and other consumables 75,000 85,500
Labour 57,600 65,800
Other variable costs 11,500 14,150
Fixed costs 90,000 92,200
Number of rooms occupied 5,760 6,100
The budget is set by head office for all hotels, and prepared based upon organisation objectives of:
(i) achieving 80% occupancy over an average (30-day) month and
(ii) being profitable on every night of occupancy.
Requirement: Section B of your report to the Exeter hotel manager
Evaluate the performance of the hotel. Explain reasons and provide future recommendations
relating to your evaluation.
30 marks
BEAM045 Individual Assessment – Client Brief
BEAM045 5
SECTION C – QUESTIONS 3 & 4
Answer ONE of these TWO questions
QUESTION 3: COSTING & PRICING
A further decision for the hotel concerns its buffet breakfast. Given its location, the hotel manager is
considering also offering this to outside customers between 8am and 10am. However, this requires
determination of a price to charge.
An accounting-based approach considers the following data:
x Direct food and beverage costs are estimated at £3.35 per person.
x The budgeted average hotel overhead costs per month are £30,000. It is considered that 1/3 of
overheads are attributed to the operation of the kitchen, such as salaries and wages for serving
staff, chef and kitchen assistants, and utilities.
x Mark-up is 40% of full cost.
A kitchen overhead absorption rate would be calculated using food service labour hours of 1,500 per
month. Although it is a buffet offering, it is estimated that the equivalent labour time per breakfast requires
20 minutes (0.33 hours). This is based upon costs of daily activities of purchase, storage, preparation,
presentation, replenishment, table set-up, clearance, and re-set, and customer service as well as kitchen
management and hygiene.
The activity-based costing (ABC) method is also being used for pricing and operating purposes. Kitchen
activities have been categorised under 3 broader categories. The following monthly (30-day)
information has been estimated for this purpose:
Activity Cost £ Driver Total Breakfast
Purchase, Delivery, Storage (PDS) 1,000 Supplier Orders 20 15
Preparation 6,000 Meals 3,000 2,400
Service 3,000 Rooms 2,000 1,500
Requirement: Section C of your report to the Exeter hotel manager.
Evaluate and advise on the costing and pricing of the breakfast as part of the proposal to expand
its customer base.
30 marks
BEAM045 Individual Assessment – Client Brief
BEAM045 6
SECTION C – QUESTIONS 3 & 4
Answer ONE of these TWO questions
QUESTION 4: PROFITABILITY
An analysis of performance of the Exeter hotel is requested by the Senior Management based in Spain.
Similar hotels in Germany have been more profitable for the 6-month period from May 2021. One possible
reason is that the Exeter hotel manager has been giving discounts on bookings, so that half of all rooms
were booked at £85 per night, instead of the standard rate of £105.
Month Occupancy (rooms)
May 400
June 1,050
July 1,500
Aug 2,300
Sept 1,950
Oct 1,850
Variable costs per occupied room are estimated at £25 per room per night; Fixed costs £1,000 per night.
Requirement: Section C of your report to the Buenos Dias Operations Manager
Evaluate and advise on the profitability of the Exeter hotel over the 6 months and for future
consideration.
30 marks
BEAM045 Individual Assessment – Client Brief
BEAM045 7
SECTION D – QUESTIONS 5 & 6
Answer ONE of these TWO questions

QUESTION 5: CASH MANAGEMENT
According to Buenos Dias corporate policy, the average age of trade receivables and trade payables
should both be 5 days and 21 days respectively.
However, for the Exeter hotel at 30 November 2021 the average age was 15 days for trade receivables
and 10 days for trade payables.
Requirement: Section D of your report to the Exeter hotel Operations Manager
Evaluate the corporate policy requirement, and advise how the Exeter hotel could better manage
these operating cash cycle practices and the implications of doing so.
15 marks

QUESTION 6: SOURCES OF FINANCE
Requirement: Section D of your report to the Exeter hotel Operations Manager
Review and advise on the sources of finance that could be considered for the kitchen upgrade
proposal.
15 marks