Project 3: Analyzing Financial Reports
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You have made good progress on the Choice Hotels project. Frank Marinara says “Because of your good work with our client, Choice Hotels, they would like us to continue working with them on a new project. Since this is more challenging than what you did previously in an individual capacity, I am assigning you to a team that will work on this project. I will send over the project details to your team via email.”

INBOX (1 NEW EMAIL)

From: Frank Marinara, Director of Finance

To: You and Your Team Members

Choice Hotels would now like MCS to complete a financial statement comparison with their largest competitor, Marriott International. I need your team to compare Choice Hotels’ 10-K reports that we gathered in the last project with Marriott International’s 10-K reports. The team will need to complete a vertical financial statement analysis using the 10-K reports from Choice Hotels and Marriott.

Choice Hotels is exploring ABC cost allocation. They have asked your team to complete the task of allocating overhead to the cost of hotel rooms.

We will need to look at Choice Hotels’ latest 10-K report and Press Release in order to complete a budget and revenue forecast.

Finally, all team members will attend a meeting with other MCS’s finance and accounting analysts to discuss the pros and cons of the strategies of the two firms.

I will need all of the above assignments done within two weeks and suggest you begin right away.

Really proud of your efforts here,

Frank

Project 3: Analyzing Financial Reports
Step 3: Analyze Cost and Investment Decisions

Choice Hotels is interested in bolstering their assets and improving their costing model to account for these assets. Choice Hotels has been building their own guest rooms and selling them to their franchise owners. The company allocates overhead costs equally to each guest room and prices them to achieve a greater profit on the higher-priced rooms. Choice Hotels is concerned that this traditional costing model may not be accurately assigning costs. For example, the selling price of one of its guest rooms, “Presidential Suite,” may not be covering its true cost. You and your team will need to apply activity-based costing (ABC) to advise Choice Hotels on resolving the company’s costing issue with the Presidential Suite guest room.

Also, your team will need to understand the concepts of production cost allocation, and breakeven to compare costing models. Two cost allocation methods of production are under consideration by Choice Hotels. Frank needs your team’s help in determining if overhead cost allocation (Choice’s traditional model) or ABC (a new model) is better for their business.

Using the same Project 3 Excel Workbook your team used in Step 1, complete the Cost and Investing worksheet. The worksheet contains information that will aid in comparing the cost allocation methods for building guest rooms for Choice Hotels’ franchise owners. When your team has finished, submit the workbook to the submission folder located in the final step of this project.

Then proceed to Step 4, where your team will develop a budget and forecast for Choice Hotels.

NB..

USE THIS SPREADSHEET TO COMPLETE ONLY THE COST AND INVESTING TAB.

Using the same Project 3 Excel Workbook your team will use in Steps 3. Answer only the tap that says Cost and Investment!