(doc) Finance and Funding in Travel and Tourism Sector

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Finance and Funding inTravel and Tourism Sector
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Explain importance of costs and volume in financial management of travel and tourismbusinesses....................................................................................................................................31.2 Analyse pricing methods used in travel and tourism sector.................................................41.3 Analysing factor affect tour and travel business..................................................................5TASK 2............................................................................................................................................62.1 Assessing different types of management accounting information used in tour and travelbusiness.......................................................................................................................................62.2 Assess use of management accounting information as a decision- making tools................7TASK 3............................................................................................................................................83.1 Interpretation of travel and tourism financial accounts.........................................................8TASK 4..........................................................................................................................................144.1 Analyse sources and distribution of funding for development of capital projectsAssociated with tourism............................................................................................................14CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17
INTRODUCTIONManagement accounting plays an important role for every type of organization. Managersinside organization should take various decision. Present will provide information of importanceof cost in an organization. This assignment will come up with relationship between cost andvolume. Report will present an information about management accounting information works asa tool to make decision. It will also provide various sources of funding for capital projects oftravel industry.TASK 11.1 Explain importance of costs and volume in financial management of travel and tourismbusinessesCosts– Cost is of different types such as direct cost, indirect cost, variable cost and fixedcost.Volume- Break even analysis, cost volume profit analysisDirect cost – It is a cost that is directly accountable to a cost object. Direct cost is costwhich 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. Indirectcost 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 containsrepeat 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 expensethat do not decrease or increase in number of services and goods. Fixed cost which is not avoidedat any cost while production. It is needed to be paid. It includes rent, depreciation, insuranceamount etc.Variable cost– It is a cost which get increased with increase in their activity level. Withchange in sales volume, change in variable cost takes place. Variable cost includes cost ofmaterial etc.
Break even analysis – It is a technique which is used to determine point where CarnivalCorporation 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 costand volume affect to Carnival Corporation operating income and their profits. There are effectiveassumptions made within this process such as sales price remain constant"variable costs remainconstant" total fixed costs remain constant" every produced unit get sold.1.2 Analyse pricing methods used in travel and tourism sectorTravel and tourism sector uses various pricing methods to attract customers. Anorganization applies various pricing methods. There are methods pricing methods are suchmethods that get utilize in order to set prices for different products which get paid by customerseasily and organization attain adequate level of profits from it. Below are different pricingmethods 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 tothis, 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. Byusing 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). Bytaking help of high price, organization became capable of recurring cost which is incurred inproduction 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, smallorganization lowers their price of goods and services to increase their sales. As compared withhigh price share of profit is bitten lowers but due to increase of sale they are able to earnsufficient amount of profits.
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