Finance and Funding in Travel and Tourism Sector

Finance and Funding in
Travel and Tourism Sector

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Explain importance of costs and volume in financial management of travel and tourism
businesses ...................................................................................................................................3
1.2 Analyse pricing methods used in travel and tourism sector ................................................4
1.3 Analysing factor affect tour and travel business .................................................................5
TASK 2............................................................................................................................................6
2.1 Assessing different types of management accounting information used in tour and travel
business.......................................................................................................................................6
2.2 Assess use of management accounting information as a decision- making tools ...............7
TASK 3 ...........................................................................................................................................8
3.1 Interpretation of travel and tourism financial accounts ........................................................8
TASK 4..........................................................................................................................................15
4.1 Analyse sources and distribution of funding for development of capital projects
Associated with tourism............................................................................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting plays an important role for every type of organization. Managers
inside organization should take various decision. Present will provide information of importance
of cost in an organization. This assignment will come up with relationship between cost and
volume. Report will present an information about management accounting information works as
a tool to make decision. It will also provide various sources of funding for capital projects of
travel industry.
TASK 1
1.1 Explain importance of costs and volume in financial management of travel and tourism
businesses
Costs – Cost is of different types such as direct cost, indirect cost, variable cost and fixed
cost.
Volume - Break even analysis, cost volume profit analysis
Direct cost – It is a cost that is directly accountable to a cost object. Direct cost is cost
which is directly allocated to a project. It includes cost of material, cost of labor, equipment etc.
expenses that are traced directly with specified cost is subjected towards direct cost.
Indirect cost – Indirect cost is cost which is not accountable to a cost object. Indirect
cost consist of office expenses, security costs, personnel (Cabral, Grilo and Cruz- Machado,
2012). This is that cost is not directly related to manufacturing. Indirect cost are of two types,
fixed cost which contains all fixed expenses and other is recurring fixed cost which contains
repeat expenses. Indirect cost are indirectly related to unit.
Fixed cost – It is a cost which do not change with change in its output. This is an expense
that do not decrease or increase in number of services and goods. Fixed cost which is not avoided
at any cost while production. It is needed to be paid. It includes rent, depreciation, insurance
amount etc.
Variable cost – It is a cost which get increased with increase in their activity level. With
change in sales volume, change in variable cost takes place. Variable cost includes cost of
material etc.

Break even analysis – It is a technique which is used to determine point where Carnival
Corporation recover their all incurred costs and from where they earn sufficient level of profits.
Break-even point is that point of production where an organization do not have profit or loss.
Cost profit volume analysis – purpose of CVP analysis is to determine changes in cost
and volume affect to Carnival Corporation operating income and their profits. There are effective
assumptions made within this process such as sales price remain constant"variable costs remain
constant" total fixed costs remain constant" every produced unit get sold.
1.2 Analyse pricing methods used in travel and tourism sector
Travel and tourism sector uses various pricing methods to attract customers. An
organization applies various pricing methods. There are methods pricing methods are such
methods that get utilize in order to set prices for different products which get paid by customers
easily and organization attain adequate level of profits from it. Below are different pricing
methods followed by different organization in order to set their prices such as:
Cost plus pricing method.
Carnival Corporation use this method for pricing in order to set their prices. According to
this, pricing method they take into consideration all variable cost (variable cost + fixed cost)
once they include all amount cost then they add up all cost which includes their profit share. By
using this method, they set up prices of their services and earn adequate level of profit.
Skimming pricing method-
Leaders of market usually follows this method to set price. According to this method,
they set highest price for their respective products and services (Clemen and Reilly, 2013). By
taking help of high price, organization became capable of recurring cost which is incurred in
production of goods and services so that they can get higher price.
Penetration pricing methods-
In market, there exist both small and big organization. To attract customers, small
organization lowers their price of goods and services to increase their sales. As compared with
high price share of profit is bitten lowers but due to increase of sale they are able to earn
sufficient amount of profits.