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Cost and Managerial Decision-making Technique | Report

   

Added on  2020-02-03

18 Pages5239 Words30 Views
Finance and Funding in theTravel and Tourism Sector

Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1................................................................................................................................................31.2................................................................................................................................................51.3................................................................................................................................................7TASK 2............................................................................................................................................92.1................................................................................................................................................92.2..............................................................................................................................................10TASK 3..........................................................................................................................................123.1..............................................................................................................................................12TASK 4..........................................................................................................................................154.1..............................................................................................................................................15CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................172

INTRODUCTIONFinance is the soul or imperative element of both the profit-motive or service-renderingorganization as none of the entity can survive in the tough market place without having enoughmoney. The present report will present significance of various cost and managerial decision-making technique like marginal costing, CVP analysis, variance analysis, budgeting and manyothers to make solid decisions for the growth of enterprise. Furthermore, the report will alsoinvestigate that how capital budgeting technique can be incorporated to make solid investmentdecisions. Along with this, in the last, report will present various source of funding consistingboth internal and external such as debt, equity, governmental funding, retained profit and other tomeet out CHTC’s financial requirement to construct a new hotel.TASK 11.1Cost is one the important aspects used by the management in order to fulfill theirrequirements as an entity spend money for buying raw materials. A travel operator has usedvariety of cost in order to uplift their existing business conditions in order to attract wide numberof customers. There are various kinds of cost involved in the business of Carib Happy ToursCompany which deals in providing travel related services which are given as below:Fixed cost- The cost incurred in the business which will not get affected with the changestakes place in the existing units produced by an entity. The fixed cost will remain the same atzero level of tour packages offered by this entity. The fixed cost for this entity will be the cost ofthe accommodation services provided to all its customers (Zhang, Bu, Wang and Hou, 2016).The tourists are offered with the unique services by designing additional and all other basicservices delivered to the variety of clients. The utilities bill incurred in the business related to thepremises of the travel and tour operator and licensing cost and franchisee cost of operating traveland tour related services.Variable cost- These kinds of cost will get changed with the increase or decrease in thesales level currently produces by an entity. The variable cost in this particular sector can rangefrom different things which will be affected with the changes occurred in the sales level of anentity. The variable cost for the travel operator includes brochures, tour packages cost, marketing3

and sales related services. It also includes the commission given to all the agency workers whowill be appointed for selling all kinds of services among the variety of customers.Cost Volume Profit analysis It is important aspects used in the managerial accounting in which the trio component isinterrelated with each other by explaining its dependence on each other (Davis, Vedder andStone, 2016). The increasing cost will reduce the profit of an entity and vice-versa. The primaryaim of this analysis is to equalize all the total cost incurred by the business entity with all thesales and the revenue generated by the business entity. The important aspects of this analysis areto be explained with the help of break even analysis which showcase that point at which an entitywill experience no profit or loss in a particular year. The break-even point of above entity ismentioned below which helps an entity in order to make good business decision which are givenas below:Particularsunits price /amountSale price£800Variable cost per unit£200Contribution per unit£600Fixed cost£60000Break-even point= Fixed cost/Contribution per unit=£60000/£600=100 touristsFrom the above mentioned analysis which states that an entity will incur no loss or profitwhen 100 tourist will take all the tour packages offered by this entity (Carroll and Smith, 2016).The above results show that the total cost incurred by the business will get equal with its revenuewhen 100 tourists will take their services in terms of tour packages.Importance of CVP analysis This analysis is an integral part of the overall business as it plays a significant role inmanaging the existing financial resources in order to predict its future expenses.4

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