Finance and Funding INTRODUCTION TASK 13 1.1 Importance of costs and volume in financial management of travel and tourism businesses
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Finance and Funding
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Importance of costs and volume in financial management of travel and tourism businesses......................................................................................................................................................31.2Analyzing pricing methods used in Merlin entertainment......................................................41.3 Analyzing factors influencing profit for Merlin entertainment.............................................52.1 Different types of management accounting information ......................................................62.2 Using management accounting information as decision-making tool for Merlinentertainment ...............................................................................................................................7TASK 3............................................................................................................................................73.1 Interpreting financial accounting of the Restaurant Group (TRG)........................................7TASK 4..........................................................................................................................................114.1 Analyzing sources and distribution of funding for the development of capital projects.....11CONCLUSION .............................................................................................................................12REFERENCES..............................................................................................................................132
INTRODUCTIONFinance and funding is the imperative aspect for any organization. It helps to arrange costeffective sources of finance and contribute towards the organizational growth for longer timespan. The present report is based on the case study of Merlin Entertainment plc. It is based onUnited Kingdom and operates across 23 countries in four continents. It has several brands likeAlton Towers, Legoland and Hotham. Along with that, Chessington as well as Heide Park arealso included. Further, report covers explanation on the importance of cost and volume infinancial management of travel and tourism business. Furthermore, different factors that areinfluencing the profit of businesses are also analyzed. In addition to this, use of managementaccounting information has also been assessed in order to take right decision for cited business.TASK 11.1 Importance of costs and volume in financial management of travel and tourism businessesCost is the most important aspect for any business because it helps to set price for theproducts and services. There are different kinds of costs that are associated with the businesspractices of Merlin Entertainment such as indirect, direct, fixed and variable (Davis, 2008). Allthese costs are considered at the time of setting price of services or setting margin of profit. Thefirst one is direct cost which is directly related to the product. This cost varies in accordance withthe flow of production so that corporation can effectively contribute towards the growth andsuccess. Here, direct cost includes labor cost , transportation cost and material cost that arerequired to provide services to the end users. On the other hand, indirect cost consists ofadministrative charges and salaries of managers as well as other expenses like rent, rates andtaxes. This in turn, company will be able to assess the overall cost associated with servicedelivery. Not only this, but other cost like fixed cost also increases the overall prices of productsand services of Merlin Entertainment (Mayer, 2005). This fixed cost does not vary in accordancewith the volume of production. It remains constant whether there is demand of travel and tourismor not. Similarly, cost of electricity charges are quite different wherein some parts of cost remainconstant and some variable.Apart from this, allocation and apportionment are different aspects which serve as theindirect cost. The allocation is done to allot cost of the whole item where cost is allocated to cost3
units. Similarly, apportionment is applied when only a portion of the benefits of whole expensesis used by cost centres or units. Thus, it only deals in some proportion of items of cost. On theother hand, break even analysis is the situation of no profit and no loss. At this stage, expensesincurred to provide services become equal to the profit gained. In addition to this, organizationtakes decision related to increase the flow of profit by reducing expenses (Corpataux, 2009). Thisis done by increasing sales turnover and meeting demand of Merlin Entertainment in an effectualmanner. Furthermore, all cost such as fixed, variable and semi variable are added and margin ofprofitability is added in the same so as to get price of that particular product or service.1.2Analyzing pricing methods used in Merlin entertainmentThere are different types of pricing strategies that are used in Merlin entertainment inorder to attract buyers and enhance their level of satisfaction. However, selection of belowmentioned pricing strategies is based upon circumstances or market behavior. The corporationuses following pricing methods to quote prices for its products and services-Cost plus pricing-This is another kind of pricing strategy under which management ofMerlin entertainment adds margin on the overall cost of products and services. It assistsorganization to cover the cost associated with services and increase the overall rate ofreturn.This price is adopted very frequently in sector of travel and tourism. This isbecause management need to ensure that what percentage of ratio should be there tomaintain desired level of performance (Müller, 2009). Accordingly margin of profit isadded in the cost of products and services.Value adding-Under this concept, value is added in the existing services so as to make itdifferent from competitors. Main motive of customers behind to adopt this prices is tomake customers loyal by offering unique services. It aids to retain buyers and also helpsto increase sales turnover. Furthermore, value adding concept facilitates to make visitorsrealize that company is offering something different which is not available tocompetitors.Discounted pricing-This pricing method is unique and implemented just to gainattraction of buyers. Here, company puts discount in prices on the basis of specialoccasions so that holiday packages can be promoted among the large number of visitorsaccordingly (Zarutskie, 2010). Furthermore, Merlin entertainment gets multiple benefits4
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