AHTC Travel and Tourism Oganisation | Report

Added on -2020-02-05

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Finance and Funding
Table of ContentsINTRODUCTION......................................................................................................................1TASK 1......................................................................................................................................1AC 1.1 Concept of CVP analysis and its importance............................................................1AC 1.2 Analysis pricing method for travel and tourism sector.............................................2AC 1.3 Factors influenced on the business profits................................................................4TASK 2......................................................................................................................................5AC 2.1 Different types of management accounting information for AHTC.........................5AC 2.2 Different types of investment appraisal techniques..................................................6TASK 3......................................................................................................................................7AC 3.1 Analysis and interpretation of financial statements..................................................7TASK 4......................................................................................................................................9AC 4.1 Internal and external sources available to develop a new hotel................................9CONCLUSION........................................................................................................................11REFERENCES.........................................................................................................................12
INTRODUCTIONFinancial management concerns with planning, organizing, directing and monitoringthe financial activities of business. It mainly aims at procurement and utilising the funds in anefficient manner. Therefore, it applies some management principles in terms of organizingfinancial resources. Angamah Happy Tours Company often shortened to AHTC is a traveland tourism organization. Operations of the company prevail in service industry that providesaccommodation and meal services to the tourist. The company is planning a summer holidaytrip for the tourist. Therefore, it needs finance for the capital projects and for the operationalpurposes. This report will helps in identifying the finance sources that are available forfulfilling its finance requirement. Moreover, cost and pricing decisions are also discussed toset prices for rendering services to the customers. Further, importance of investment appraisaltechniques and management accounting information techniques that helps management totake effective decisions are analysed. TASK 1AC 1.1 Concept of CVP analysis and its importanceCost volume profit relations:It is a concept that is used by management to understandthe relationship between cost, sales volume and profit. Further, analysis determines the costand volume relationship with the business activities and assesses its impacts. It helps businessmanagement to take effective and efficient decisions and assesses business risk. Importance of cost and volume relationship for AHTC:Company can determine thecost and volume relationship along with its impacts on business operations. Under the costfactor, there are two types of cost that are fixed as well as variable. Fixed cost is not directlyrelate to the business production and remains constant. However, variable cost gets changeswith the production changes. In relation to the given scenario, AHTC variable cost getsinclined with the number of tourist increases and vice versa. Cost and volume relationshiphelps organization to ensure effective financial management. Importance of this analysis forAHTC is explained below:Breakeven point:This analysis is mainly used to determine the breakeven point. Thepoint indicates the sales level at which AHTC will not incur any loss or profit. At this point,business sales and the total of fixed and variable cost will be equal (Osazevbaru, 2014).Therefore, AHTC can determine minimum sales level so as to not incur any loss whichaffects negatively to the company's operation. 1 | P a g e
Contribution:Another, the most important benefit of the analysis for AHTC is that ithelps in determining contribution through deducting the variable cost from the business sales.Moreover, it identifies per unit contribution and contribution margin ratio (Vanhove, 2013). Ithelps managers to identify that how much of the sales are required to cover the business fixedexpenses to reach up to the breakeven point. Further, after covering all the fixed expenses,business sales will contribute to the business profits.Profit:The excess of contribution over the fixed cost helps to ascertain theprofitability. Thus, AHTC can determine profits by identifying the difference betweenbusiness revenues and expenditures. AHTC generates revenues through providing distinctkinds of services to the customers. However, meal, accommodation, hospitality and otherkind of services such as entertainment facilities are required to make payments by theorganization. Therefore, it is clear that AHTC can evaluate the operational results. Target Profit:CVP analysis helps Angamah Happy Tours company to determinesales level to achieve its profit targets. It can be determined through adding the fixed cost tothe target business profits and the divided to the contribution margin ratio (Page and Connell,2006). Therefore, company can met profit targets effectively. Moreover, the analysis helps todecide sales per unit and the total business sales to meet its business goals. Therefore, AHTCcan make effective business policies in order to fulfil its sales targets that help to meet itsprofit goals.AC 1.2 Analysis pricing method for travel and tourism sectorDeciding service prices for the tour and travel company is a strong market strategydecision. Angamah Happy Tours Company is planing for a summer holiday trip atCarribbean. The company is providing airplane and hotel accommodation facilities to thetourists. Therefore, company is required to determine the prices for the services provided.Distinct pricing methods are available to AHTC to decide prices that can be charged to eachcustomer that are explained below:Cost Oriented Method: Cost plus pricing and mark up pricing are the cost orientedmethod for setting e prices. Under the cost plus pricing method, AHTC has to determine thetotal cost and then added a profit percentage that is expected by the company (Cooper, 2005).For instance, if the total cost is 200£ and company expects profit @20% than the price willbe calculated as follows:Price = Total cost + Profit expectation= 200£ + (20% of 200£)2 | P a g e

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