Accounting for Decision Making: Case Study on Crystal Hotel Pty Ltd

RUNNING HEAD: Accounting for decision making
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Accounting for decision making

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Contents
Case overview...................................................................................................................3
Task 1................................................................................................................................3
Task 2................................................................................................................................4
Task 3................................................................................................................................5
Task 4................................................................................................................................6
Task 1................................................................................................................................7
Task 2................................................................................................................................8
Task 3..............................................................................................................................10
Task 4..............................................................................................................................11
Conclusion......................................................................................................................12
References.......................................................................................................................13

Accounting for decision making 3
Case overview:
The report focuses on the Crystal Hotel Pty ltd. In the report, has been studied that
how the various accounting and costing tool could are used by the companies to manage the
performance of the business and make better decisions about the company. There are various
techniques such as buy or rent budget, market feasibility etc which has been used in the
report to reach over a conclusion about the performance of the business. It has been measured
that how each of the decision related to business process and performance is made by a
business.
Task 1:
On the basis of the evaluation on the new project, wellness centre of the firm, the
company has mainly 2 options related to either buy the machinery or make it on rent, out of
which one could be opted by the business on the basis of the cost and the profits of the
business. Through the calculations, the overall budget of the company is $ 45,550. The rent
and buy calculations have been made on the basis of the given figures in the case to make
decision that whether the machinery must be bought or make it on rent.
The calculations express the buy option as better option in order to set up the
machinery in the plant. In case of buying the machinery, the business would become the
owner of the machinery and the owner would be in the position to make the use of machinery
in any way. However, the buying option could be harmful for the business in order to make
the changes in the machineries at the time of changing in the technology.
Further, the rent option could also be good in case of making the change in the
machinery at the time of alternations and modifications in the technology. However, in case
of rent, the business never becomes the owner of that machinery and it has to follow various
terms and conditions according to lender.
The calculations brief the rent option as better option as in case of rent the
machineries, the total expenses of the company at the end of the third year would be $
12,519. However, if the buy option is taken into the concern than the total expenses of the
company would be $ 43,024. So, it is suggested to the company to go for rent option.
BUY OPTION

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COST
Discounted
Residual
Value
Servicing Total Cost
over 3 years
Treadmill (3
pieces) $18,171 $721 $600.00 $18,050
Elliptical Trainer
(2 pieces) $8,078 $321 $600.00 $8,357
Exercise Bike (4
pieces) $13,328 $529 $600.00 $13,399
Rowing Machine
(1 piece) $2,726 $108 $600.00 $3,218
TOTAL COST $42,303 $1,679 $2,400 $43,024
RENT OPTION
Discounted
Value
Year 1
Discounted
Value
Year 2
Discounted
Value
Year 3
Total Cost
over 3 years
Treadmill (3
pieces) $1,824 $1,740 $1,659 $5,223
Elliptical Trainer
(2 pieces) $935 $892 $851 $2,678
Exercise Bike (4
pieces) $837 $798 $761 $2,397
Rowing Machine
(1 piece) $776 $740 $706 $2,222
TOTAL COST $4,372 $4,170 $2,318 $12,519
(Bromwich and Bhimani, 2005)
Task 2:
The case explains about the ne project of membership of the new gym of the business.
It has been found that a new gym has been started by the business and it has planned an
option for the visitors (basic membership or full package). The case explains that the charged
fee on both the packages would be different and thus the business has planned to conduct the
NPV technique on the project to evaluate that which package is better for the business.
In addition, the case and the calculations express that the net present value of the new
project has been evaluated and it has been measured that the net present value if new
packages of the business would be $392,705. The amount is quite higher and explains that if