Concepts Of CVP Analyses and Pricing Methods : Assignment
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Added on 2020-01-16
Concepts Of CVP Analyses and Pricing Methods : Assignment
Added on 2020-01-16
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Finance and Funding in theTravel and Tourism Sector
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Concept of CVP analysis and its importance.........................................................................31.2 Pricing methods used by CHTC for determining the charging price from tourists...............51.3 Influencing factors of profit...................................................................................................6TASK 2............................................................................................................................................82.1 Different types of management accounting information.......................................................82.2 Investment appraisal techniques and their use ......................................................................8TASK 3..........................................................................................................................................103.1 Interpretation of ratios of TUI travel company....................................................................10TASK 4..........................................................................................................................................124.1 Sources of Funding 12CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................142
INTRODUCTIONFinance and funding are an integral part of business; it assists to organisations to properly useopportunities and accomplish its long-term goal effectively. Necessary expenses take place dailyso to manage operations firm is required money. It is very difficult to survive in the crucialcorporate market without sufficient funds. For the present report, The Carib Happy ToursCompany (CHTC) is being taken into account. It is planning for a summer holiday for that firmis planning to charter an aeroplane for its tourists (Mattson, 2014). The assignment will describethe concepts of CVP analyses and pricing methods of the entities will be discussed in this study.The report will focus on investment appraisals techniques for making an effective decisionregarding arranging the whole trip. Ratios of CHTC will be illustrated in this assignment. TASK 11.1 Concept of CVP analysis and its importanceTour and travel industry is contributing well in the economic development of the country. Torun business company has to invest a huge amount in various activities. Cost impact on theentities in both ways, excess spending can decrease revenues of the firm whereas controlledexpenditures can enhance overall profit of the organisation. The Carib Happy Tours Company isengaged in the travel business; several costs are attached to the cited firm are as below discussed:Fixed cost: These are such spending which is fixed and do not get changed with salesand/or production (Huibin, Marzuki and Razak, 2012). Month on month employee of thefirm has to spend money in such kind of activities. As CHTC is operating in the travelindustry, so it needs premises, license, franchise, etc. These all included in the fixed cost,apart from this cited firm has to pay salaries to staff members, pay utility bills, etc. Theseall spending show in the income statement of the company, and if these are high, then itcan negatively impact on the profit of the organisation. Variable costs: These are such disbursement which can be influenced by the sales orproduction of the entity. Variable costs in CHTC are brochures, packaging cost of thetrip, marketing and advertisement expenses (Wang and Xu, 2014). Apart from this citedfirm has to give the commission to travel agents so that they can work for enhancing thesales of the organisation. The value of transportation gets changes every time, so3
expenditures related to the arrangement of transportation such as aeroplane etc. areincluded in the variable costs of the company. Cost Volume Profit analyses (CVP)CVP analyses are process of planning which supports to the management team of CHTC topredict the future sales, cost, profit, etc. (Shazali and et.al, 2013). These all elements are interrelated as if sales of the cited firm get increased then the cost can bemanaged. But if cost increases then it will impact on the profit margin of the organisation as itwill reduce the earnings of the entity. With the help of CVP analyses, CHTC can manage itsoperations effectively and plan to reduce expenditures so that profit can get enhanced. Break-even points are the essential aspect of this tool, by this way management can identify the pointwhere they can reach to no profit and no loss stage. The concept of the method is to review the4Illustration 1: CVP analysesSources: (Break-Even Point, 2016)
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