Significance of Cost and Volume in Financial Management of T&T business
Added on 2020-07-23
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Finance and Funding in Traveland Tourism sector
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1: Significance of cost and volume in financial management of T&T business.................31.2: Pricing techniques which are implemented in travel and tourism sector........................41.3: Analysis of factors influencing profit for travel and tourism business...........................6TASK 2 ...........................................................................................................................................82.1 and 2.2: PPT part..............................................................................................................8TASK 3..........................................................................................................................................153.1: Interpretation of financial statements and accounts of Dalata hotel group...................15TASK 4..........................................................................................................................................164.1: Sources and allocation of funds for the development of capital projects......................16CONCLUSION..............................................................................................................................18REFERENCES..............................................................................................................................19
INTRODUCTIONFinance is an essential resource which plays vital role in managing the operations andfunctions of organisation. Funding is an activity indicates towards generating finance resourcesfrom multiple options available in marketing (Evans, Stonehouse and Campbell, 2012).Generally finance and funding is used to gathering the finance requirement and allocation ofresources in required areas. This report defines finance and funding activities in respect of traveland tourism sector. All the resource and options of generating finance and allocation of resourcesare defined subject to tourism sectors. Financial practices are explained at micro level and issuesare considered in this context. Career and growth opportunities are described while working as asupervisors at management level in the sector of travel and tourism industry. This context willhelp to understand the cost, volume and profit, management and accounting information alongwith distribution of finance resources. Carnival Corporation and plc is the selected organisationto analyse and compare the subject with Dalata Hotel group plc. TASK 11.1: Significance of cost and volume in financial management of T&T businessCarnival corporation Plc: This is one of the largest leisure travel company which ishaving plenty of operation at different locations. Such as North America, Europe and othernations. It is dealing in almost 10 international cruise line brands. They are responsible for tourfinancing to maximum tourists to move around various attractive destination of differentcountries (Pike, 2012). The travel and tourism business is more profitability business in now adays. It has been found that every year wide range of tourists are travelling across variousattractive places. There are various aspects those are related with finance in accordance to toursand travelling business. Such as:Cost: It is said to be the amount which is occur in financing of tour packages for people.It is an important aspects that is needed to be kept in mind while planning any trip. There arevarious packages which are offered to the people according to their comfort and on that basischarges are applicable to them.Direct: It is that cost which is directly related with the production process of a productand services. Some of them are those items for which costs are complied like as person,sales region or other client. Example, direct material, sales commission and freight.
Indirect: These are those costs that are not directly accountable to the cost of production.Like as specific project, functions and product. Few examples are administrationexpenses and other utilities.Fixed: As per this cost that does not change with an increase or decrease in the totalamount of product and service produced by an organisation. These are to be paid byowner of the firm. Such as, factory rent, interest expenses and so on.Variable: These are those costs which are varies or changes with the production of oneextra units. Raw material, labour cost and packaging are directly associated with variablecosts.Semi-fixed: It is also known as semi-variable cost which is composed of a combinationof fixed and other variable elements. If company does not occurs any production duringthe time, a fixed cost is still going to incurred.Volume: It is term as total quantity of services and expenses which is denote in financialvalue are considered into this. It is mostly related with total quantity of tickets people arepurchasing from the Carnival company.Importance of costs:As, it is more critical aspects in travelling sectors. The growth and sustainability isentirely depend upon the cost they are incurring during the year. It can be organised throughproper planning so that chances of mistakes and losses can be reduce (Heung, Kucukusta andSong, 2011). Tours managers always tries to increase revenue for the company and for this theyused to make strategies to sell out maximum tour packages during the season. Cost reduction:It is one of the main factors which a firm is looking always. They plan toprovide much economical tour services in order to reduce there own costs. It will help inincrease efficiency and profitability for the company.Decision-making: It is has been primarily crucial for the finance department to makeproper decision regarding the company's position during the year. Whether, they arehaving sufficient amount of return from every trip to sustain their business.Increasing performance of managers:Cost-systems can be beneficial for themanagement in order to expand their business operations in various parts of the nation.Importance of volume:
BEP Analysis:Such kind of procedure is used to determine that stage where business islaying at the current position (Chio, 2014.). It is mostly related with total costs and expenseswhich are incur to balance there operation. Carnival company is always trying to plan to at leastcover there total cost that are invested by the company. Economical of scale:It is related with that cost benefits that are generate with increasingresults of a products and services. It can help the company to overcome variable cost per unitsbecause of operational efficiency and synergies. Diseconomies of scale:Under this particular stage, a situation in which economic ofscale no longer operate for Carnival plc. These are occur because of increase in size of businesswhich is resulting from every tour plan.Volume can increase by determining total sales capacity generated as a dollar amount.Company's have plenty of option to increase profitability of an organisation. They need to simplycut down costs and maintain volume. Cut down production and pass the total revenue on to clientin an effort to increase total sales of the company.1.2: Pricing techniques which are implemented in travel and tourism sectorIn every business segment, it is necessary to determine those people which are interestedin travelling across the nation. For this, they are been offered various tour packages that can helpthem to plan their trip in more effective manner. People are more price sensitive so they used toselect those services and products that can benefit them for long term. It is known as identicaltechniques because having wide range of price plan and scheme (Nielsen and Spenceley, 2011).Proper segmentation needed to be done prior providing any packing offer to the people so thatexact demand can be identify. Pricing polices are changes according to their time and situation.In order to make there journey more memorable, company always used to provide best pricingpackages to them so that effective customers can enjoy there journey in more easy manner.Pricing method is the well organise route which is taken by Carnival plc in fixing the cost fortheir tour packages. Some pricing techniques which are attracting customers are discussedunderneath:Cost based pricing: It is the most easiest way to determine exact a plan should be prices at. It isdivided into various segment such as:Full cost pricing which is related with the combination of variable and fixed cost etc.Direct cost pricing is associated with variable costs plus total percentage of markup.
Cost plus pricing is an effective pricing techniques which is used by Carnival company toincrease their profitability.Skimming pricing: Under this pricing method carnival plc is used to charge high pricingat the initial level of trip planning. It is mostly adopted by higher class people. Example:International stay and food facilities to upper class people.Penetration pricing: It is known as that techniques which a carnival company offers tocustomers at a price significantly minimum than its competitors (Song and Lin, 2010).Like for example: Coupons, discounts and extra accommodation. Demand based pricing: Such kind of pricing is mostly depend according to the demandof customer as well as supply of the tour plan. It is said to be more realistic in nature.Competition oriented pricing: Such kind of pricing is known as market oriented pricingwhich consists of based prices that a competitors charges without considering client demand andwith there own costs. Some of them are:Premium pricing: Discounted pricing Parity pricing: Product line pricing: It is associated with given packages that are related to one another.The planning cost of these tours are also will not be same. It is mostly indented to get higherprofit from the set line. Such as :Destination Cost (In pound)Domestic region100National250International500Seasonal pricing: It is that pricing which is charged by Carnival company according tothe season. Such as:Summer pricing: At this time maximum number of customer are used to travel todifferent destinations. The company used to change high price (Benson and Henderson,2011). They increase the cost of trip with providing necessary discount as well.
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