As an example, let's say we have a manager with a base salary of $52,000 and fringe benefits of 20%. This manager works year round and is paid equally throughout the year. Our imaginary resort has a 13 week peak during which room rates and visitor counts balloon. The peak season produces 75% of annual revenue.
For financial reporting, the books will reflect his weekly expense of $1,200. If the wizards keep a separate set of management accounting records, they would see he actually costs $3,600 per week during the peak. Conversely, he's worth about $400 per week during the slow period.
Most managers will take their vacations during the slow period. Often they will be permitted to work fewer days each week. On the other hand, I have seen seasonal operations where these key people are burned out during the slow season filling in gaps left by hourly workers. These unfortunate managers log lots of overtime during unprofitable times and then work round the clock during the peak.
Regardless of how you view the manager's role, it's important to realize the peak months are not as good as they seem. The slow months are not the disasters they appear to be either.
You would not even open your doors or hire one person if it were not for the opportunity during the peak season. By charging your fixed expenses to the cost based on volume, you can spot weak spots during peak times*.
Two bad weeks during the peak can become a catastrophe for many resorts. You read articles on places where you can't get a seat for dinner unless you camp out overnight going Chapter 11. Owners tend to spend money too liberally during the peak times. They see huge profits regardless of a few slips.
* Special Note: Do not perform these allocations on the formal set of accounting records. These are for operations management review only.
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