Cost Accounting and Ethical Dilemmas

This assignment delves into various aspects of cost accounting. It involves analyzing the profitability of Chloe Enterprises, assessing an ethical dilemma faced by Mr. Smith regarding a business trip to Dorquay Hotel, and examining the impact of marketing strategy on production levels for Chloe Enterprises. The analysis includes calculating contribution margins, fixed costs, and determining the required production volume for achieving desired profit levels.

Running head: ACCOUNTING FOR DECISION-MAKING
Accounting for Decision-Making
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ACCOUNTING FOR DECISION-MAKING
Executive Summary:
The current report aims to deal with three different case studies; the first is related to
Dorquay Hotel. The second case deals with the ethical issues related to Practical Solutions
Limited and Dogto Limited to find out ethical issues and the merits and demerits of employee
code of conduct to the former organisation. The final case study sheds light on computing the
break-even for Chloe Enterprises along with evaluating the feasibility of the proposed change in
the marketing strategy of the organisation.
Dorquay Hotel has adopted maximum length of stay, particularly during the peak seasons
with no discount rates to the customers. In relation to the ethical issues, it has been assessed that
the appearance to the third parties and the effect on integrity, independence and integrity might
be high and therefore, it is advised to Mr Smith to avoid the trip. Finally, it has been found out
that Chloe Enterprises needs to produce the same amount of units to achieve the same profit
level. Thus, any change in the marketing strategy is not needed, since the production capacity
would remain the same.

2ACCOUNTING FOR DECISION-MAKING
Table of Contents
Introduction:....................................................................................................................................3
Part a:...............................................................................................................................................3
Answer to Question 1:.................................................................................................................3
Answer to Question 2:.................................................................................................................4
Part b:...............................................................................................................................................4
Answer to Question 1:.................................................................................................................4
Answer to Question 2:.................................................................................................................5
Part c:...............................................................................................................................................5
Answer to Question 1:.................................................................................................................5
Answer to Question 2:.................................................................................................................6
Answer to Question 3:.................................................................................................................6
Answer to Question 4:.....................................................................................................................7
Answer to Question 5:.................................................................................................................7
Conclusion:......................................................................................................................................7
References and Bibliographies:.......................................................................................................9

3ACCOUNTING FOR DECISION-MAKING
Introduction:
The current report aims to deal with three different case studies; the first is related to
Dorquay Hotel. The budgeted room revenue for three months of the hotel has been computed by
considering the expected room occupancy and expected average room rate. This has been
validated further by explaining the way the management of the hotel has estimated the
occupancy rate. The second case deals with the ethical issues related to Practical Solutions
Limited and Dogto Limited to find out ethical issues and the merits and demerits of employee
code of conduct to the former organisation. The final case study sheds light on computing the
break-even for Chloe Enterprises along with evaluating the feasibility of the proposed change in
the marketing strategy of the organisation.
Part a:
Answer to Question 1:
Calculation of budgeted room revenue for Dorquay Hotel:
Particulars
Decembe
r
Januar
y
Februar
y
Number of rooms 20 20 20
Average room rate $ 180 $ 198 $ 198
Room occupancy rate 90% 95% 85%
Budgeted room revenue $ 3,240 $ 3,762 $ 3,366

4ACCOUNTING FOR DECISION-MAKING
Answer to Question 2:
For estimating the minimum length of stay, Dorquay Hotel estimates a period of high
demand, which is followed by low demand. It accepts longer duration stays during arrival, while
it rejects shorter duration stays (Butler & Ghosh, 2015). This helps to raise occupancy during the
slow period. In case of the hotel, such estimation has been accurate, as the room rate has
increased by 10% in the month of January from December. In addition, the hotel has applied the
maximum length of stay, when the rooms are sold out at higher rates (Collier, 2015). This is
because the hotel has not accepted reservations at particular discounted rates for multiple night
stays extending into the sold out period. It has been observed that there is no change in the
average room rate in February; however, there is a fall in the occupancy rate due to adoption of
such policy.
Part b:
Answer to Question 1:
The major ethical concerns include independence, objectivity and sincerity. Based on the
provided facts, it could be observed that it is a paid for Mr Smith and his family to Los Angeles.
This could lead to an impression that the trip is a token of gift, which could have effects on the
selected software (Graham, Harvey & Puri, 2015). Thus, at the time of undertaking the software
decision, Mr Smith might be obliged to Dogto Limited due to the trip. From the perspective of
the third party, a conflict of interest might arise along with lack of independence. Conversely, it
would serve as an immense opportunity to obtain additional information regarding the software.
An opportunity is inherent to suit the software users for obtaining an insight of the future plan
related to software development.

5ACCOUNTING FOR DECISION-MAKING
This would help in saving funds for Practical Solutions Limited, since they would not
have to incur any expense for the trip. However, the suggestion of taking the family to a trip
indicates that the trip is more of a gift (Hartman, DesJardins & MacDonald, 2014). The
appearance to the third parties and the effect on integrity, independence and integrity might be
high and therefore, it is advised to Mr Smith to avoid the trip.
Answer to Question 2:
It is necessary for the organisation to create its own code of conduct. The main benefits
are that it would deliver a message to the staffs regarding the acceptable behaviour along with
promoting an aura of credibility and trust around the business dealings (Mihăilă, 2014). This
would increase the professionalism of the organisation and the management team would be able
to foresee any ethical dilemmas. However, the demerit is that such code could not possibly cover
all the situations and the staffs might be of the view that a minimum standard is set, which could
be time consuming and costly to develop. In order to implement such measure effectively, the
organisation needs to create a team from its existing employees to maintain the same and this, in
turn, would act as positive motivation for the staffs.
Part c:
Answer to Question 1:
Particulars Units
Selling price per unit $ 60
Less: Variable manufacturing cost per unit $ 28

6ACCOUNTING FOR DECISION-MAKING
Less: Variable marketing and distribution costs per
unit $ 12
Contribution margin per unit $ 20
Fixed Costs:
Annual fixed manufacturing costs $ 120,000
Annual fixed non-manufacturing costs $ 370,000
Total fixed costs $ 490,000
Break-even point (in units) 24,500
Break-even (in sales) $ 1,470,000
Answer to Question 2:
Particulars Units
Annual sales volume 35,000
Break-even (in units) 24,500
Margin of safety (in units) 10,500
Margin of safety (in
dollars) $ 630,000
Answer to Question 3:
Particulars Units
Annual sales volume 32000
Contribution margin per $ 20

7ACCOUNTING FOR DECISION-MAKING
unit
Total fixed costs $ 490,000
Profit $ 150,000
Answer to Question 4:
Particulars Units
Selling price per unit $ 60
Less: Variable manufacturing cost per unit $ 28
Less: Variable marketing and distribution costs per
unit $ 16
Contribution margin per unit $ 16
Annual fixed manufacturing costs $ 120,000
Annual fixed non-manufacturing costs $ 290,000
Total fixed costs $ 410,000
Units to be produced for achieving the same profit 35,000
Answer to Question 5:
Based on the above table, it could be stated that Chloe Enterprises needs to produce the
same amount of units to achieve the same profit level. Thus, any change in the marketing
strategy is not needed, since the production capacity would remain the same.

8ACCOUNTING FOR DECISION-MAKING
Conclusion:
From the above discussion, it could be found out that the Dorquay Hotel mainly focuses
on longer duration stays, while the shorter duration stays are mostly avoided. It has adopted
maximum length of stay, particularly during the peak seasons with no discount rates to the
customers. In relation to the ethical issues, it has been assessed that the appearance to the third
parties and the effect on integrity, independence and integrity might be high and therefore, it is
advised to Mr Smith to avoid the trip. Finally, it has been found out that Chloe Enterprises needs
to produce the same amount of units to achieve the same profit level. Thus, any change in the
marketing strategy is not needed, since the production capacity would remain the same.