Management Accounting in Hotelplan Holding Limited

This assignment provides an in-depth analysis of management accounting information and its role in the decision-making process for Hotelplan Holding Limited. The report discusses various types of management accounting information, including financial ratios, budget forecasts, variance analysis, and cost accounting. It also examines how these tools can be used to assess trends in financial performance, set prices for services, develop budgets for upcoming time periods, and identify deficiencies between actual and standard costs. The summary highlights the importance of management accounting information in supporting business decisions and achieving competitive advantage.

Finance and Funding in the
Travel and Tourism Sector

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
1.1 Importance of cost and volume in financial management................................................3
1.2 Analysis of various pricing method used in the organization..........................................4
1.3 Factors influencing the profit of travel and tourism sector..............................................5
LO 2.................................................................................................................................................6
LO 3.................................................................................................................................................6
3.1 Interpretation of financial accounts of Audley travel group Ltd......................................6
LO 4...............................................................................................................................................12
4.1 Different sources and distribution of funding for the capital project development.......12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Travel and tourism sector provide the various product and services to their customers like the Holiday trips, tours, adventurous program,
ski and snow trip, hotel rooms, food etc. to their customers. To provide all the facility they need fund from the different sources to fulfil their
requirement. Hotelplan Holding Limited is a private limited company which provide the travel and tourism facility to their customers. They
provide the various services like cycling Holidays, family holidays, northern light adventures, snowboard holidays etc. to attract the customer
and retain the customer in the company.
This report highlight the importance of cost, profit and volume in management of travel and tourism sector. It explains the various
pricing methods used by the organization to improve their performance. It also explains the various factors which influence the profit of the
travel and tourism sector. It highlights the various accounting information and their uses in the travel and tourism sector. The report provides
interpretation of financial data and their comparison of travel and tourism sector. It also helps to understand the various sources of funds and the
capital projects.
LO 1
1.1 Importance of cost and volume in financial management
There are different cost in the organization which are associated with the company like direct cost, indirect cost, variable cost, finance
cost, allocation and apportionment etc.
Direct cost : Direct cost refers to the cost which are directly related to the production of goods and services in the organization
(Camilleri, 2018). Some example of direct cost are labour, material, expenses and distribution cost. Hotelplan holding limited use the direct cost
to estimate the direct expenses of the Hotel like wages and salary of labour, the material used for enhancing their services like computers,
laptops, buses etc.
Indirect cost : Indirect cost is the cost which is not directly related to the production activity like lightning, rent, depreciation etc. The
estimation of indirect cost help the Hotelplan Holding limited to manage their expenses and prepare the financial plan for the organization.
Through the estimation of the indirect cost, they can easily manage the cost of the cabin crew, staff members etc.
Fixed cost : It always remains fixed in the organization irrespective of the number of units produced (DIFFERENT WAYS TO
CATEGORIZE COSTS, 2018.). Fixed cost help the Hotelplan holding limited to measure the performance of the organization by estimating the
overhead like depreciation on machinery, rent, salaries of the staff etc.
Variable cost : Variable cost varies with the change in output. If the Hotelplan entertain more customer than the variable cost like bed,
furniture, food also increases. The variable cost of the organization is important to visualize the cost to prepare budget and activities to increase
their sales and profit of the organization.
In the context of hotel unit, cost assessment is highly required as it helps in setting prices for the services offered. Referring all costs
manager of hotel unit can assess cost per customers and by adding profit margin into it prices can be determined.
Importance of volume
Break even analysis : Break even point refers to the situation where the cost of the organization is equal to its revenue. It helps in
making decision for the organization. It is important for the Hotelplan Holding Limited to determine the number of customers visited and
attracted toward the travel and tour plan (Gurtner, 2016). It also helps in budgeting and setting target, determine the profit margin and control
and monitor the cost of the adventurous programme, buses fair or rent etc. By analysing the relation of cost and revenue in organization they can
easily estimate the position of the business and prepare the budget for the financial and non financial activities like promotion of Hotelplan,
salaries and wages of the company staff, lightning, rent of their offices and the various equipment use for the safety of the customer.
Economies of scale : By increasing the production and reducing the cost of the product and services a company can achieve its
economies of scale. It is important for the Hotelplan Holding limited to reducing the per unit cost in attaining the customer and increasing their
profit. By expanding their scale of production they can easily achieve their target and increase their productivity and performance. They can also
negotiate with their suppliers to provide discount on the hotel rooms and food services.
1.2 Analysis of various pricing method used in the organization
There are various kinds of pricing methods used by the organization to estimate their price and enjoy the competitive advantages in the
organization like Skimming pricing, penetration pricing, cost plus pricing etc.
Penetration Pricing : Penetration pricing is used to attract the customer by lowering the price in the initial stage and then increasing the
price of the product and services according to their profit margin (Xu, and et.al., 2016). They lower the price of goods and services to capture the
attention of the customer and provide them the better services in compare to the competitors in the market.
Skimming pricing : In screaming pricing strategy company charge the highest price from the customer which can be bear by the
customer to fulfil their demand or customer is willing to pay. Then they lower the price to attract more customer toward the organization product
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and services. In other words skimming pricing is a pricing strategy in which initially company charge the higher price and in latter stage they cut
down their prices to attract the more customer (Kienzler, and Kowalkowski, 2017).
Cost plus pricing : In cost plus pricing strategy company add the profit margin in the total cost of the product and services. It mostly
used in government project where government forces the suppliers to control the direct, indirect and fixed cost of the offered product and
services.
Competitive pricing strategy : In competitive pricing strategy, firm set the price of goods and services according to the price of
competitors in the market. They analyse their price of the competitors and reduce or increase the price according to the competitor price. It helps
in monitoring the activities of the competitors in the market and evaluate the fluctuation in their prices.
Hotelplan holding limited use the penetration price in the organization. They provide their services on lower price in initial stage to
attract the customer towards the business. Customer need the qualified and safe products and services within the minimum price. When the price
of the product and services are lower than the competitors', customer are more attracted toward the business and enjoy their service and when
customer is satisfied with the services they raise their price to meet their target and increase the profit of the company (Li, and et.al., 2016).
In off-season Hotelplan Holding limited use the competitive pricing strategy in the organization. They analyse the price of the other
travel and tourism business in the market and if they lower down their prices than the Hotelplan also lower down their prices.
1.3 Factors influencing the profit of travel and tourism sector
There are various factors which influence the profit of the Hotelplan holding limited. The external and the internal environment both
affect the profit of the organization by direct and indirect way. The factor which affect the profit are season, weather, political environment,
travel trends etc.
Season : The travel and tourism industry is depended upon the seasons. In summer season most of the people are love to travel in cold
places and spent their holiday. The large number of foreigner comes to visit the places of UK in winters. Hotelplan holding limited can raise
their prices to earn the more profit. In off-season, they can lower down their prices to attract the local people and also earn the profit in off-
season. In high season they increase their prices of flight, buses, hotels to earn the higher profit ( Factors Affecting Travel And Tourism Industry,
2014).
Weather : The weather of the country also affect the business of travel and tourism sector. In the case of good weather customers are
more interested to prepare the trip plan and enjoys the rides. It increases number of visiting customer, productivity and profitability of the
Hotelplan Holding limited. In winter, the profit of the Hotelplan holding limited increases because they offer ski and snow trip holidays trips to
their clients. In bad weather like the natural disaster the business of the Hotelplan Holding limited is also affected. It reduces their profit because
the number of visitors are reduces.
Events : The various events organized by the organization also influence their profit. On the special events like festivals, holidays,
Olympics increases their profit. On the special events people prepare their plan to travel and reduces the daily work load of their life (Ruan, and
et.al., 2018). The travel and tourism industry offers various services and facility on the special occasions like discount on family trip, extra
facility etc. It helps them to increase the profit of the organization. Hotelplan holding limited change their strategies in the special events to
attract the customer and earn the higher profit.
Travel trend : The changing trend in travelling also influence the profit of the organization. Trent refers to changes in the activities,
product and services from the one year to another year. The media and marketing spread the trend in the market like the trend of destination
wedding and the sports events etc. The trend of destination wedding influence the people to visit that places and organize such events in that
places which ultimately increase the number of customer and profit of the Hotelplan holding limited.
LO 2
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Finance and Funding in the Travel and Tourism Sector: TASK 2
2.1 Different types of Management Accounting Information are
Management Accounting Information is used a decision making
process for internal managers of Hotelplan Holding Limited to take some
major decisions using available data and information.
It can be in the form of Financial Ratios, Budget forecasts,
Variance Analysis etc. Financial Ratios can be used to know the
profitability of the company and various ratios can also be interpreted
from those ratios and also trend analysis can also be done through past
revenues, sales and growth.
Budgeting helps Hotelplan Holding Limited in making estimates about
the future costs and liabilities. It also helps in setting up budgets for each
department to analyse profits separately for each department and identify
which department is giving higher profits.
Variance Analysis helps Hotelplan Holding Limited in comparing
the actual budget with standard budget and if there are any variations than
they should be examined and corrected. Variances which are over
budgeted are to be taken action so that there should not be any variances
left. Cost Accounting is the accounting in which accounts are made to
analyse the extra cost occurred and there are no profits earned from those
extra spending of the expenditure.
2.2 Use of management accounting information as a decision
making tool
 By doing assessment of final accounts manager of
Hotelplan Holding Limited can assess trends with regards
to financial performance. In other words, FA analysis helps
company in identifying whether its performance improved
or deteriorated over the time frame or not. Referring this,
firm can take suitable decisions and thereby would become
able to get competitive advantage.
 Management Accounting Information also helps company
management in knowing what should be sold and what will
be the price of the product. Hence, it helps company in
setting appropriate prices of the services offered.
 Using budget related information manager of Hotelplan
Holding Limited can develop competent plan for the
upcoming time period. As it helps in assessing financial
position with regards to the upcoming time frame. Further,
budget also gives input for making evaluation of
departmental performance in the context of financial
aspects.
 Variance analysis tool assists Hotelplan Holding Limited in
knowing the deficiencies between the actual costs and
standard costs. They also helps in understanding the causes
for the deviation assessed. Referring this, corrective
measures can be taken for improvement purpose.

LO3
3.1 Interpreting financial statements of Audley Travel Group Ltd.
Ratio Analysis of Audley Travel Group Ltd.
Liquidity Ratio
Particulars 2016 2017
Current Assets 209218 181460
Current Liabilities 182165 140412
Current Ratio 1.15 1.29
Current Ratio
1.05
1.1
1.15
1.2
1.25
1.3
1.35
1.15
1.29
2016
2017
Liquidity ratios shows the liquidity position of the company. In this case, Current ratio of the company is increasing from year 2016 to
2017 which shows that company is having 1.29 rupees of assets against every 1 of Current Liabilities. Company should keep minimum amount
to pay off current liabilities so that it does not fall into liquidity crunch in near future due to fall of cash. Company's current ratio has been
increased due to decrease in both current assets and current liabilities but current liabilities have been decreased more than current assets which
shows that current liabilities are paid off from available current assets.
Profitability Ratio
Particulars 2016 2017
Gross Profit 36998 44133
Net Sales/ revenue 173468 193487
Gross Profit Ratio 21.33% 22.81%
Gross Profit Ratio
0.21
0.21
0.22
0.22
0.23
0.23
21.33%
22.81%
2016
2017
Particulars 2016 2017
Net Profit 21967 16455
Net Sales/ revenue 173468 193487
Net Profit Ratio 12.66% 8.50%
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Particulars 2016 2017
Net Profit 21967 16455
Total Assets 222659 196992
Return on Assets 9.87% 8.35%
Particulars 2016 2017
Net Profit 21967 16455
Total Equity 39914 56559
Return on Equity 55.04% 29.09%
Particulars 2016 2017
Net Profit 21967 16455
Capital Employed 40494 56580
Return on Capital Employed 54.25% 29.08%
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Profitability Ratio shows the profits of the company from the revenue which company has earned. Gross Profit Ratio shows the profit
incurred by the company after deducting all the direct expenses from the revenue. Company's Gross Profit is increasing from 21.33% to 22.81%
which shows good sign for the company. Company's revenue and cost of goods sold both are increasing but revenue is increasing more than the
increase in the Cost of Goods Sold because of which Gross Profit of the company is increasing.
Net Profit shows the profit earned by the business after deducting all the direct and indirect expenses from the revenue earned by the
company by through sales. In this company, Net Profit of the company is decreased from 12.66% to 8.50% due to decrease in the financial
income of company. Company's financial income has been decreased in year 2017 because of which its profit after tax has also been decreased.
Otherwise, Company's indirect expenses are also been decreased but due to the rise in interest expenses net profit are decreased over the time
frame (Genus, ed., 2016).
Return on Assets shows the profits earned by the business on assets invested by the company. Company's Return on Assets is been
decreased from 9.87% to 8.35% due to decrease in profits and also company's assets are also decreased. Company should invest more in Fixed
Assets in order to earn more profits otherwise its profits will be decreasing year by year.
Return on Equity shows that how many returns company's owners are earning by investing into the company. In this company's Return
on Equity is decreasing from 55.04% to 29.09% due to decrease in profits and also due to increase in shareholders of the company. Equity is
increasing which shows that company is not giving any dividends to its shareholders rather it is maintaining retained earnings to invest back into
the company which is good for the company but company is not using its funds in investing into fixed assets because of which profits are
decreased.
Overall, the profitability ratio of the company is not very good and company should put its main focus on net profits and Finance income
and how efficiently to use its retained earnings to invest in assets so as to increase the sales of the company which will ultimately increase the
profits of the company.
Turnover/ Activity Ratio
Particulars 2016 2017
Net Sales/ revenue 173468 193487
Average Debtors 174219 134298
Debtors Turnover Ratio 0.996 1.441
Debtors collection Period (in days) 367 253
Debtors Turnover Ratio
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0.996
1.441
2016
2017
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Particulars 2016 2017
COGS 136470 149354
Average Creditors 179879 139584
Creditors Turnover Ratio 0.759 1.070
Creditors Payment Period (in days) 481 341
Particulars 2016 2017
Net Sales/ revenue 173468 193487
Total Assets 222659 196992
Total Assets Turnover Ratio 0.779 0.982
Debtors Turnover Ratio shows how many times a company is converting its sales into cash by collecting them from debtors. Company's
Debtors Turnover Ratio is increasing which is a good sign for the company. Previously, company was converting its debtors in cash in 0.996
times but now it converts 1.441 times in a year. Debtors Collection Period is also decreased from 367 days to 253 days which shows that now
company can convert its cash from debtors within 253 days.
Creditors Turnover Ratio shows that in how many times company pays to its creditors in a year. Company's Creditors Turnover Ratio is
been increased from 0.759 to 1.070 which shows that company is paying more faster to its creditors than previously it used to pay. Creditors
Payment period is decreased from 481 days to 341 days which shows that it is good for the company because it will not increase the finance cost
for the company for making delays in payment.
Total Assets Turnover Ratio shows that for 1 of assets company is earning how much revenue. Company's Total Turnover Ratio should
be higher than the 1 but in this company it is lower than the 1 but it is increasing from 0.779 to 0.982 which is nearly to 1. This shows that assets
are productively used and it will be good for the company if its invests more in assets in order to earn more revenue so as to incur more profits.
Overall, Turnover ratios of the company is good but company can improve more its turnover ratios by investing in productive assets.
Solvency Ratio
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Particulars 2016 2017
Net Profit before Tax 23805 18146
Interest Paid 554 6979
Interest Coverage Ratio 42.97 2.60
Interest Coverage Ratio
0
10
20
30
40
50 42.97
2.60
2016
2017
Interest Coverage Ratio shows how many times company can pay its fixed charges i.e. Finance cost from available profits. Company's
ratio is decreased from 42.97 times to 2.60 times which is not good for the company. It is due to company's profits have been decreased and
finance cost have been increased. Company should focus on decreasing the finance cost by decreasing the debt of the company.
Overall, the company's performance in year 2017 has been decreased as compared to year 2016 because of decrease in net profits,
increase in finance cost and company is not investing its retained earnings in productive assets. Also, Company's finance income is decreased
because of which net profits also decreased. Company's Total Assets Turnover Ratio increased which in turn recognized as good for the
company. Thus, Company should put more focus on its performance in order to gain more profits for the company. Variances and then taking
the suitable actions and finding out the reasons for such deviations.
LO 4
4.1 Different sources and distribution of funding for the capital project development
Capital projects: Capital projects are those projects which help to improve and maintain the City assets. The capital projects are newly
construction, renovation, expansion or replacement projects. The example of the capital projects are tourism information points, cycle route
development and improvement, interpretation boards, cross railways project etc.
Tourism information points are the projects which provides the location to the visitors with the information related to the place, maps,
lodging and other items which are related to the tourism sector. The information related to the tourism location help the customer to gain the
knowledge and information about the place and provide them self assist services.
The theme parks provide the various entertainment program, rides and outdoor amusement to their customers. This theme park increases the
production and profit of the travel and tourism sector by attracting the adult and children towards the park. They can raise their profit by
investing in the theme parks (Cherrington, and et.al., 2018).
Sources of funds
The travel and tourism sector collect the fund from the different sources such as public and non-public fund. In public fund sources they
raise the fund from the government, loan from the banks etc. in non-public fund the travel and tourism sector raise the fund from the venture
capital, equity funding debt funding etc.
Venture capital : Venture capital is a mechanism in which VC provide funds to the newly own and innovative idea business. The risk
associate with the business are high but the same time the growth of potential was also high. The Hotelplan holding limited can raise fund for
their travel and tourism business,
Equity funding : In equity funding the travel and tourism sector can raise the fund for their capital projects by the issuing stocks to the
market. They can invest their fund in theme park to attract the more customer toward the Hotelplan holding limited company. It also values and
additional facility in their business.
Loan : They can also take loan from the government or banks to raise the fund and investing in the tourism information point. It helps
them to generate the information about the locations and capture the attention of people toward the Hotelplan Holding limited company which
ultimately increases their profitability and productivity.
CONCLUSION
The report summarizes the importance of cost, profit and volume in the travel and tourism industry and how these factor help the
organization to raise the profit. It concludes the various prising strategies used by travel and tourism industries to differentiate their product from
the competitors and to increase their profit. This report help in understood the various accounting information types and their uses in the
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organization to improve their performance and earn the higher profit in the market. The various sources of funding like government fund, equity,
loan and venture capital help the organization to invest in the market and improve the performance of travel and tourism sector.
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REFERENCES
Books and Journals
Camilleri, M. A., 2018. Nurturing travel and tourism enterprises for economic growth and competitiveness. Tourism and Hospitality
Research. 18(1). pp.123-127.
Cherrington, L. K., and et.al., 2018. Sources of Funding Transit in Texas [2018] (No. PRC 15-11.3). Texas A & M University. Transportation
Policy Research Center.
Genus, A. ed., 2016. Sustainable consumption: design, innovation and practice (Vol. 3). Springer.
Gurtner, Y., 2016. Returning to paradise: Investigating issues of tourism crisis and disaster recovery on the island of Bali. Journal of Hospitality
and Tourism Management. 28. pp.11-19.
Kienzler, M. and Kowalkowski, C., 2017. Pricing strategy: A review of 22 years of marketing research. Journal of Business Research. 78.
pp.101-110.
Li, B. and et.al., 2016. Pricing strategy and coordination in a dual channel supply chain with a risk-averse retailer. International Journal of
Production Economics. 178. pp.154-168.
Ruan, Q. Z., and et.al., 2018. Identifying sources of funding that contribute to scholastic productivity in academic plastic surgeons. Annals of
plastic surgery. 80(4). pp.S214-S218.
Xu, Z. and et.al., 2016. Data-driven pricing strategy for demand-side resource aggregators. IEEE Transactions on Smart Grid. 9(1). pp.57-66.
Online
DIFFERENT WAYS TO CATEGORIZE COSTS. 2018. [Online]. Available through <https://www.inc.com/encyclopedia/costs.html>
Factors Affecting Travel and Tourism Industry. 2014. [Online]. Available through <https://www.bartleby.com/essay/Factors-Affecting-Travel-
And-Tourism-Industry-PK>
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