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Financial Management of Travel and Tourism : Report

   

Added on  2020-01-15

16 Pages5303 Words158 Views
Finance and Funding1
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TABLE OF CONTENTSINTRODUCTION................................................................................................................................3Task 1...................................................................................................................................................31.1 Importance of costs and volume in financial management of travel and tourism businessesusing Merlin Entertainments Plc..................................................................................................31.2 Pricing methods used in the travel and tourism sector using Merlin Entertainments............61.3 Factors influencing profit for travel and tourism businesses using Merlin EntertainmentsPlc................................................................................................................................................9Task 2.................................................................................................................................................102.1 Different types of management accounting information that could be used in travel andtourism businesses using Merlin Entertainments Plc................................................................102.2 Use of management accounting information as a decision-making tool for MerlinEntertainments Plc.....................................................................................................................11Task 3.................................................................................................................................................123.1 Financial accounts of The Restaurant Group (TRG) Plc for the year ended 28 December2014 showing at least two years performance...........................................................................12TASK 4...............................................................................................................................................134.1 Sources and distribution of funding.....................................................................................13CONCLUSION..................................................................................................................................14REFERENCES...................................................................................................................................152
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INTRODUCTION Travel and tourism industry has contributed a lot to the world's economy in terms of highcontribution in GDP. The application of financial management is seen to be crucial within thebusiness environment in determining cost and taking pricing decisions. This unit is focusedtowards the case of Merlin Entertainments, a leading entertainment company of UnitedKingdom. As per the given information, company operates around 110 attractions in 23 countriesacross four continents (Merlin Entertainments, 2016). The present report explains about theimportance of costs and volume in financial management of travel and tourism businesses aswell as the pricing methods that are used in this sector. However, the next section of studyrepresents the different types of management accounting and the use of management accountinginformation as a decision making tool in travel and tourism businesses. Factors that areinfluencing the profit of tourism entrepreneurs specially to Merlin Entertainments Plc are alsoexplained. In addition, case study of The Restaurant Group plc, a leading restaurant company istaken into consideration for interpreting financial accounts to assist decision making in travel andtourism businesses. At last, final section represents the sources and distribution of funding forpublic and non-public tourism development.TASK 11.1 Importance of costs and volume in financial management of travel and tourism businessesusing Merlin Entertainments Plc In respect with the given case scenario, Merlin Entertainments Plc is a leadingentertainment company which aims at becoming a worldwide leader in branded, location-based,family entertainment from which it creates a strategy to attain high growth, high return and afamily entertainment company (Bhowmik and Saha, 2013). Cost concept Before explaining the concept of cost and volume, this is important to identify variouskinds of costs as it is helpful in financial management of the report. Various types of costs areexplained in below: Direct cost: Cost that is significantly associated with the production is called as directcost. Direct cost of production process include material, labor as well as many other direct3
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expenditures. Direct cost can be in the form of human resources and materials. These costs aremandatory to be bear at the time of manufacturing process (Adams, 2006). Indirect cost: The cost which is not directly linked to the production process but itindirectly links with the manufacturing unit is significantly known as indirect costs. Severalrange of indirect cost are administration, personnel as well as security costs. In other words,factory cost bear by business is known as indirect cost.Fixed cost: In respect with the manufacturing unit, fixed cost is one which remains sameat any level of production. In other words, cost which does not change with the production levelis called as fixed cost. The fixed cost is going to be incurred at the production of single unit. Variable cost: Another form of cost is variable which changes as per the level ofproduction. This cost has a changing nature as per the production volume (Halabi and Carroll,2015). Dependent cost is said to be the variable cost. For an example: organization produces 100units so it bears less cost, on the other hand, at the production of 1000 unit it bears increasedcost . Such kind of cost is said to be variable cost and has a relevant aspect in manufacturingindustry. Examples of variable cost are advertising, insurance and office supplies. Allocation and appropriation of costs: Main aim behind the allocation of cost is to identify, aggregate and access cost incurredduring manufacturing as per the objectives of costs. However, to calculate actual cost per unit,this is too important to divide the cost within all the departments. In order to allocate cost, it isthe foremost important to take pricing decisions. In respect with the mentioned company, majortask is of dividing cost into various activities as per the requirements so that process of pricingdecision can become easier. For a service industry like as Tourism, It becomes difficult to setprice as per the cost occurred from different activities. The mentioned company is facing lot ofissues including more competition at the time of offering services to the customers of UK inwhich prices of offering has become a foremost issue for the company. Allocation of cost is themajor concept so as to decide the actual pricing of products by assessing cost per unit (Hu, Tianand Zhu, 2016). Within service industry, appropriation of cost is the actual allocation of cost andassessment of cost per unit. However, it is easier to understand costing concept so that decisionover reducing expenses can be taken. However, this is all the round, mandatory to use differentcosting methods including absorption costing, marginal costing, activity based costing and so on.4
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