BIZ201 Accounting for Decision Making: Crystal Hotel Financial Report

This case study provides a detailed analysis of Crystal Hotel Pty Ltd, focusing on the application of various accounting and costing tools for business performance management and decision-making. It examines techniques such as buy vs. rent analysis, market feasibility studies, and promotional budget evaluations. The analysis covers decisions related to a new wellness center project, including machinery acquisition (buy or rent), membership package pricing (basic vs. full), and promotional activities. It calculates the Net Present Value (NPV) of new membership packages and evaluates the cost-volume-profit (CVP) analysis for a promotional event, determining break-even points and target sales volumes. The study also explores software acquisition options (license vs. subscription) using NPV analysis to guide investment decisions. The overall goal is to provide insights into how accounting information informs strategic business choices.

RUNNING HEAD: Accounting for decision making
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Accounting for decision making

Accounting for decision making 2
Contents
Case overview...................................................................................................................3
Task 1................................................................................................................................3
Task 2................................................................................................................................4
Task 3................................................................................................................................5
Task 4................................................................................................................................6
Task 1................................................................................................................................7
Task 2................................................................................................................................8
Task 3..............................................................................................................................10
Task 4..............................................................................................................................11
Conclusion......................................................................................................................12
References.......................................................................................................................13

Accounting for decision making 3
Case overview:
The report focuses on the Crystal Hotel Pty ltd. In the report, has been studied that
how the various accounting and costing tool could are used by the companies to manage the
performance of the business and make better decisions about the company. There are various
techniques such as buy or rent budget, market feasibility etc which has been used in the
report to reach over a conclusion about the performance of the business. It has been measured
that how each of the decision related to business process and performance is made by a
business.
Task 1:
On the basis of the evaluation on the new project, wellness centre of the firm, the
company has mainly 2 options related to either buy the machinery or make it on rent, out of
which one could be opted by the business on the basis of the cost and the profits of the
business. Through the calculations, the overall budget of the company is $ 45,550. The rent
and buy calculations have been made on the basis of the given figures in the case to make
decision that whether the machinery must be bought or make it on rent.
The calculations express the buy option as better option in order to set up the
machinery in the plant. In case of buying the machinery, the business would become the
owner of the machinery and the owner would be in the position to make the use of machinery
in any way. However, the buying option could be harmful for the business in order to make
the changes in the machineries at the time of changing in the technology.
Further, the rent option could also be good in case of making the change in the
machinery at the time of alternations and modifications in the technology. However, in case
of rent, the business never becomes the owner of that machinery and it has to follow various
terms and conditions according to lender.
The calculations brief the rent option as better option as in case of rent the
machineries, the total expenses of the company at the end of the third year would be $
12,519. However, if the buy option is taken into the concern than the total expenses of the
company would be $ 43,024. So, it is suggested to the company to go for rent option.
BUY OPTION

Accounting for decision making 4
COST
Discounted
Residual
Value
Servicing Total Cost
over 3 years
Treadmill (3
pieces) $18,171 $721 $600.00 $18,050
Elliptical Trainer
(2 pieces) $8,078 $321 $600.00 $8,357
Exercise Bike (4
pieces) $13,328 $529 $600.00 $13,399
Rowing Machine
(1 piece) $2,726 $108 $600.00 $3,218
TOTAL COST $42,303 $1,679 $2,400 $43,024
RENT OPTION
Discounted
Value
Year 1
Discounted
Value
Year 2
Discounted
Value
Year 3
Total Cost
over 3 years
Treadmill (3
pieces) $1,824 $1,740 $1,659 $5,223
Elliptical Trainer
(2 pieces) $935 $892 $851 $2,678
Exercise Bike (4
pieces) $837 $798 $761 $2,397
Rowing Machine
(1 piece) $776 $740 $706 $2,222
TOTAL COST $4,372 $4,170 $2,318 $12,519
(Bromwich and Bhimani, 2005)
Task 2:
The case explains about the ne project of membership of the new gym of the business.
It has been found that a new gym has been started by the business and it has planned an
option for the visitors (basic membership or full package). The case explains that the charged
fee on both the packages would be different and thus the business has planned to conduct the
NPV technique on the project to evaluate that which package is better for the business.
In addition, the case and the calculations express that the net present value of the new
project has been evaluated and it has been measured that the net present value if new
packages of the business would be $392,705. The amount is quite higher and explains that if

Accounting for decision making 5
the project would be implemented than the business would be able to generate $ 392705.
Company is suggested to make investment into this new project (Ward, 2012). The company
is also suggested to entertain the external visitors with a different package so that the overall
cash inflow of the business could be improved.
Membership (Basic 39/month, Full Package
80/month)
Membershi
p Project
Cash
Outflow
Cash
Inflow
Net
Cash
Flow
Tax After
Tax CF
PV
Factor NPV
Year 0 $35,350 -
$35,350 $0 -$35,350 1 -
35,350
Year 1 $808 $222,20
0
$221,39
2 $66,418 $154,97
4 0.9259 143,495
Year 2 $808 $238,48
1
$237,67
3 $71,302 $166,37
1 0.8573 142,637
Year 3 $808 $256,21
2
$255,40
4 $76,621 $178,78
3 0.7938 141,924
NPV $392,70
5
Task 3:
The case explains about the new promotional activities of the business. It brief how
much profits could be generated by the business through promoting the centre in better
manner in the market. The case brief that a wellness centre has been started by the business
and now the management is planning to promote it through various promotional events. The
case explains that various tools and sources are available through which the promotion could
be done in better way by the business.
It has also been measured through the market feasibility that the business should
promote the business and the wellness centre to improve the cash inflows and the profitability
level of the business. The evaluation express that these promotional events are quite
reasonable for the business and would improve the performance of the business.
Promotional Budget

Accounting for decision making 6
Item Price(excl
GST) GST Price (incl
GST)
Quantity
Required
Total
Budgete
d Value
The Brisbane
times (Quarter
page strip)
1132 $113.20 $1,245 1 $1,245
Digital foyer
advertising
(weekly rate)
250.00 $25.00 $275 5 $1,375
Bus shelter
poster (trail panel) $550 $55.00 $605 3 $1,815
Digital Billboard
(medium) 2500.00 $250.00 $2,750 1 $2,750
Printed Billboard $600 $60.00 $660 3 $1,980
Flyers $295 $29.50 $325 8 $2,596
Retail
advertising $358 $35.80 $394 8 $3,150
TOTAL $5,685 $569 $6,254 29 $14,91
2
(Bergar, 2011)
Task 4:
The case explains about the various expenses which have been bear by the company
in order to implement the promotional events to promote the wellness centre of the business.
The case brief $ 80 per person as the night charges in which $ 35 is the variable expenses of
the event and the total fixed cost of the business was $ 45,000. These figures explain about
the total cost which has been bear by the business in order to host the event.
The calculations explain that the contribution margin of the business is $ 45 as well as
the margin (CM) of the business is 44%. It further adds into the evaluation that the total
breakeven point of the business is 1000 units and the break even amount of the business is $
80,000. It also adds that if the company wishes to generate the total profit of 1,00,000 in the
event then the company has to make sure that 3,222 units have been sold in the market
(Madhura, 2015).
In addition, it has been found that the cost volume profit analysis is very beneficial
and effective for a business to make various decisions about the production and sales of the
business. It takes the concern of variable expenses, fixed expenses, contribution margin etc to

Accounting for decision making 7
evaluate that how many units must be sold by the business to reach over a position where the
profit and loss of the business is nil. The case explains that the CM of business is lower so it
is important for the business to sell more tickets to achieve the BEP level (Zimmerman &
Yahya-Zadeh, 2011).
CVP ANALYSIS
CM $ 45.00
CMR 56.25%
Break-even (units) 1,000
Break-even ($) $80,000.00
Number of units of
service required to earn
a target net profit of $
100, 000 3222
(Bonner, 2008)
Task 1:
On the basis of the evaluation on the new project, wellness centre of the firm, the
company has mainly 2 options related to either buy the plant or make it on rent, out of which
one could be opted by the business on the basis of the cost and the profits of the business. The
rent and buy calculations have been made on the basis of the given figures in the case to
make decision that whether the plant must be bought or make it on rent.
On the basis of the above stated task 1, it has been found that both the cases has some
pros and cons. The buy option has its own pros and cons and the rent options also has its own
pros and cons. Both of the options are better and vary according to the needs and the other
factors of the business (Ward, 2012).
The calculations brief the rent option as better option as in case of rent the
machineries, the total expenses of the company at the end of the third year would be $
32,987. However, if the buy option is taken into the concern than the total expenses of the
company would be $ 38,480. So, it is suggested to the company to go for rent option.
BUY OPTION

Accounting for decision making 8
Cost
Year 0
Discounte
d
Servicing
Year 1
Discounte
d
Servicing
Year 2
Discounte
d
Servicing
Year 3
Total Cost
over 3
years
Zamioculcas
Zamiifolia (20
pieces)
$800 $12,133 $11,235 $10,402 $34,570
Raphis
Excelsa (10
pieces)
$1,360 $1,360
Howea
Forsteriana (10
pieces)
$570 $570
Chamaedore
a Elegans (30
pieces)
$1,980 $1,980
TOTAL $4,710 $12,133 $11,235 $10,402 $38,480
RENT OPTION
Discounted
Value
Year 1
Discounted
Value
Year 2
Discounted
Value
Year 3
Total Cost
over 3 years
Zamioculcas
Zamiifolia (20
pieces)
$1,407 $1,303 $1,207 $3,917
Raphis Excelsa
(10 pieces) $2,546 $2,358 $2,183 $7,087
Howea
Forsteriana (10
pieces)
$1,843 $1,706 $1,580 $5,128
Chamaedorea
Elegans (30
pieces)
$5,607 $6,056 $5,192 $16,854
TOTAL $11,403 $11,422 $10,161 $32,987
Task 2:
The case explains about the new plan of the business that whether the company
should take the subscription of the software or buy it permanently has been evaluated. The
case explains that the business is required a software for various process and the activities of
the business and it has two option or either buy or take subscription.

Accounting for decision making 9
In addition, the case and the calculations express that the net present value of the new
plan has been evaluated and it has been measured that the net present value of licence would
be $ 7,695 and the Subscription’s net present value is $ 5,758. The amount of subscription is
quite lower and explains that if the subscription would be taken than the business would have
to pay $ 5,758 in total. Company is suggested to make investment into the subscription
project itself (Weygandt, Kimmel & Kieso, 2009).
Licence
Membership Cash Ouflow PV Factor PV of Cash outflows
Year 0 $6,900 1 $6,900
Year 1 $300 0.925925926 $278
Year 2 $309 0.85733882 $265
Year 3 $318 0.793832241 $253
TOTAL $7,827 $4 $7,695
Subscription
Membership Cash Ouflow PV Factor PV of Cash
outflows
Year 0 1 $0
Year 1 $2,172 0.925925926 $2,011
Year 2 $2,237 0.85733882 $1,918
Year 3 $2,304 0.793832241 $1,829
TOTAL $6,713 $4 $5,758

Accounting for decision making 10
(Nielsen, Mitchell & Nørreklit, 2015)
Task 3:
The case explains about the new promotional activities of the business. It brief how
much profits could be generated by the business through promoting the centre in better
manner in the market. The case brief that a wellness centre has been started by the business
and now the management is planning to promote it through various promotional events. The
case explains that various tools and sources are available through which the promotion could
be done in better way by the business. The total budget of the wellness centre for these
promotional activities is $ 20,500 (Haney, 2009). The case explains that the given list must be
managed by the promoters.
It has also been measured through the market feasibility that the business should
promote the business and the wellness centre to improve the cash inflows and the profitability
level of the business. The evaluation express that the following cost of the promotional
activities of the business would be:
Venue Costing
Item Price(excl
GST) GST Price (incl
GST)
Quantity
required Total Cost
Chair cover hire $8 $0.80 $9 300 $2,640
Gift hampers $15 $1.50 $17 10 $165
Open
entertainment $30 $3.00 $33 3 $99
Balloon
Canterpieces $5 $0.50 $6 30 $165
Guest gifts $8 $0.82 $9 300 $2,706
Food $30.08 $3.01 $33 300 $9,926
Beverages $9 $0.90 $10 300 $2,970
AV system and
staging $0.00 $0 $0

Accounting for decision making 11
Event staff rate $22 $2.20 $24 $70 $1,694
$20,365
Task 4:
The case explains about the various expenses which have been bear by the company
in order to use the conferences hall as a meeting room. The case brief $ 100 per person has
been charged on company as the night charges in which $ 40 is the variable expenses of the
event and the total fixed cost of the business was $ 10,000. These figures explain about the
total cost which has been bear by the business in order to host the event (Higgins, 2012).
The calculations explain that the contribution margin of the business is $ 60 as well as
the margin (CM) of the business is 40%. It further adds into the evaluation that the total
breakeven point of the business is 167 units and the break even amount of the business is $
16,667. It also adds that if the company wishes to generate the total profit of 50,000 in the
event then the company has to make sure that 1000 units have been sold in the market.
In addition, it has been found that the cost volume profit analysis is very beneficial
and effective for a business to make various decisions about the production and sales of the
business. The benefits of the CVP analysis have been already stated in the above given Task
4 (Haney, 2009).
CVP ANALYSIS
CM $ 60.00
CMR 0.60
Break-even (units) 167
Break-even ($) $16,666.67

Accounting for decision making 12
Number of units of
service required to earn
a target net profit of $
50, 000 1,000
Conclusion:
The overall case explains that the various accounting and costing tool could are used by
the companies to manage the performance of the business and make better decisions about
the company. Each of the techniques is different and offer different results to the business
such as buy or rent budget, market feasibility etc. On the basis of each of these techniques,
different suggestions have been given to the management of the company. The company is
suggested to control over the expenses and follow the efficiency accounting and costing
process to improve the profitability level.

Accounting for decision making 13
References:
Bonner, S. E. (2008). Judgment and decision making in accounting. Prentice Hall.
Chandra, P. (2011). Financial management. Tata McGraw-Hill Education.
Haney, L. H. (2009). Business Organization and Combination. BiblioBazaar, LLC.
Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.
Madhura, L. (2015). Financial management. Tata McGraw-Hill Education.
Nielsen, L. B., Mitchell, F., & Nørreklit, H. (2015, March). Management accounting and
decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39, No.
1, pp. 64-82). Elsevier.
Ward, K. (2012). Strategic management accounting. Routledge.
Weygandt J., Kimmel P., Kieso D. (2009). Managerial Accounting:Tools for business
decision making. John Wiley & sons.
Zimmerman, J. L., & Yahya-Zadeh, M. (2011). Accounting for decision making and
control. Issues in Accounting Education, 26(1), 258-259.