BTHM THH3113: Cost and Performance Analysis Case Study

This report analyzes the cost and performance management of a tourism and hospitality event, examining various cost components, cost drivers, and cost control techniques. It begins with a segregation of costs, differentiating between variable and fixed expenses, and calculates the overall profit from the event. The report then delves into the concept of activity cost drivers and their influence on business decisions, providing examples and illustrating how they impact cost allocation and profitability. Furthermore, it explores direct and indirect costs, along with cost control strategies such as venue selection, packaged deals, in-house catering, and promotion through free tools. The report also addresses cost considerations related to pricing, including the impact of visitor numbers and venue-related expenses. Finally, the report presents a profit analysis for two events, providing a comprehensive understanding of the financial aspects of event management in the tourism and hospitality sector.

COST AND PERFORMANCE 1
COST AND
PERFORMANCE

COST AND PERFORMANCE 2
Contents
Task 1:........................................................................................................................................3
Task 2:........................................................................................................................................7
Task 3:........................................................................................................................................8
References:...............................................................................................................................14

COST AND PERFORMANCE 3
Task 1:
The following table shows the segregation of costs:
Variable or fixed
costs
Particulars
Revenue:
Visitors
Exhibitors
Total revenue
Category
Venue related costs:
Location rental Fixed
Event staff
Variable since the
number of staff
depends upon the
number of visitors
and exhibitors
Different equipment rental Fixed
Decorations Fixed
Lighting Fixed
Additional signage
Variable since the
number of staff
depends upon the
number of visitors
and exhibitors
Speakers
Variable since the
number of staff
depends upon the
number of visitors
and exhibitors
Rock band performers fee Fixed

COST AND PERFORMANCE 4
Video production Fixed
Chairs
Variable since the
number of staff
depends upon the
number of visitors
and exhibitors
Social media costs:
Twitter Fixed
Facebook Fixed
Pinterest Fixed
Instagram Fixed
Google+ Fixed
Linkedin Fixed
Snapchat Fixed
Advertising:
Print Fixed
Outdoor Variable
Radio Variable
Television Fixed
Drinks Variable
Snacks Variable
Particulars Amounts in $

COST AND PERFORMANCE 5
Revenue:
Visitors
10,80,000.0
0
Exhibitors
40,500.0
0
(Assuming
exhibitors shall
also pay)
Total revenue
11,20,500.0
0
Category
Projected
subtotal Expected costs
Venue related costs:
Location rental -
Event staff 26,400.00
30,222.0
0
Previous years
wages plus
superannuation
Different equipment rental 40,000.00
40,000.0
0
Decorations 2,00,000.00
2,20,000.0
0
Lighting 1,50,000.00
1,50,000.0
0
Additional signage 30,000.00
30,000.0
0
Speakers 12,000.00
12,000.0
0

COST AND PERFORMANCE 6
Rock band performers fee 30,000.00
48,000.0
0
Video production 25,000.00
30,500.0
0
Chairs 12,000.00
18,000.0
0
Social media costs:
Twitter 2,500.00
2,375.0
0
Facebook 3,000.00
3,450.0
0
Pinterest 1,200.00
1,380.0
0
Instagram 4,000.00
4,600.0
0
Google+ 2,500.00
2,875.0
0
Linkedin 3,000.00
3,450.0
0
Snapchat 750.00
862.5
0
Advertising:
Print 80,000.00
1,00,000.0
0
Outdoor 40,000.00
56,000.0
0
Radio 6,000.00
18,000.0
0
Television 10,000.00 10,000.0

COST AND PERFORMANCE 7
0
Drinks 4,000.00
3,600.0
0
Snacks 6,000.00
6,720.0
0
Total Costs
7,92,034.5
0
Profit from event
3,28,465.5
0
The concept of activity cost drives is used in the accounting term. This is the driver which
affects the expenses that are incurred in the normal course of the business operations. When
using the activity based costing system, an activity driver is the one that affects the costs such
as labour, maintenance, and other such variable costs. The cost drivers are very important
when it comes to taking decisions.
The cost drivers directly influence the business activities. These include many cost drivers
which is connected with each activity. In order to illustrate, direct labours are the ones that
drives the activities and the product manufacturing. In case, the cost of the labour is high, it
would lead to an increase in the amount of the production of hoods and the services. And in
case, there is an increase in the cost of warehousing, then that would mean an increase in the
amounts incurred towards the manufacturing of the products or providing of the services.
The activity cost driver is also known as the casual factor that leads to an increase or a
decrease in the cost of each activity. These are the factors or the drivers that are capable of
changing the cost of the warehousing or change in the level of the production (Bragg &
Bragg, 2019). Then there are some other technical cost drivers such as the machine hours, the
number of set ups, the number of sales inspection etc. in case, the business is able to ascertain
the cost drivers, then the business can easily estimate the cost of the production that would be
incurred in the future.

COST AND PERFORMANCE 8
In respect of cost allocation, if the company uses machine hours for the purposes of
determining the costs, then the total amount of the overhead shall be divided by the number
of the machine hours (which would give us pre-determined overhead rate) and then the
number of the machine hours shall be multiplied with the pre-determined overhead rate and
the stated amount shall be charged to the cost of the product. The cost driver is the one that
simplifies the allocation of the amount of the manufacturing overhead. It is important for the
company to calculate the correct manufacturing overhead since it helps in the determination
of the prices of the products that are produced by the company (Wilkinson, 2019). Also, the
cost drivers that are selected have a direct effect on the profits that are earned by the
company.
The determination of the costs would affect the continuance of the business venture in the
future. In case, the cost of the production is much more than the amount of the revenue which
is derived from the sale, then there is a greater amount of profit that the business would shuts
down. And in case, the cost of production is less than the amount of revenue, then it would
mean earning profits for the company and hence expansion into the new industries by the
company ("Cost Driver - Know the Significance of Cost Drivers in Cost Accounting", 2019).
Hence, if the cost drivers are inaccurate, then the costs determined would alo be incorrect
which would affect the profitability of the company.
The following table shows the cost drivers for each cost:
Particulars Cost drivers
Revenue:
Visitors
Exhibitors
Total revenue
Category
Venue related costs:

COST AND PERFORMANCE 9
Location rental
Event staff
This depends on the number of visitors and the
exhibitors that would attend the event
Different equipment rental
This depends on the number of visitors and the
exhibitors that would attend the event since they are
the ones that control the crowd and manage things
Decorations This depends on the type of the event
Lighting
This depends on the event type and also, the timing
of the event since at night, more lighting would be
required
Additional signage This depends on the type of the event
Speakers
This depends on the type of the event and the
number of visitors since more visitors would mean
more speakers to enhance audibility
Rock band performers fee
This depends upon the expected revenue collection
from the event
Video production
This depends upon the expected revenue collection
from the event
Chairs
This depends on the number of visitors and the
exhibitors that would attend the event
Social media costs:
Twitter
This depends upon the type of the event and the
type of visitors that the company wants to attract
Facebook
This depends upon the type of the event and the
type of visitors that the company wants to attract
Pinterest
This depends upon the type of the event and the
type of visitors that the company wants to attract
Instagram
This depends upon the type of the event and the
type of visitors that the company wants to attract
Google+
This depends upon the type of the event and the
type of visitors that the company wants to attract

COST AND PERFORMANCE 10
Linkedin
This depends upon the type of the event and the
type of visitors that the company wants to attract
Snapchat
This depends upon the type of the event and the
type of visitors that the company wants to attract
Advertising:
Print
This depends upon the number of copies the
company wants to print
Outdoor
This depends upon the area from where the
company wants to attract the visitors, like if it wants
to attract visitors from all across the country, then
this cost would depend upon the states etc
Radio
This depends upon the revenue which is expected to
be collected from the event
Television
This depends on the number of visitors and the
exhibitors that would attend the event
Drinks
This depends on the number of visitors and the
exhibitors that would attend the event
Snacks
This depends on the number of visitors and the
exhibitors that would attend the event
Total Costs
Profit from event
Task 2:
The direct cost is the one which is directly related with any specific item such as the
product or the service, the example of which includes the cost of material that are used
for the purposes of creating the product which is a direct cost. An example include the
cost of any consumable supply which is directly connected with the manufacture of the

COST AND PERFORMANCE 11
product. Then there are some other costs which includes, the payment of rent, the
production salaries etc. these form the part of indirect costs ("Direct costs —
AccountingTools", 2019).
The following are the cost control techniques:
 The company must be flexible in terms of its requirement. It is sometimes good to use
what is free. For example, instead of choosing one area for venue, look for other
options. Browse cites that provide venues etc and go for the best one, this would help
in reducing costs.
 The company must look for the packaged deals such as the packages of catering,
tables, chairs etc all from one party. This would help in saving money and increasing
profit for the company. Also, the company could ask the venue manager to supply the
equipment or even food and beverage. The company could go for in house catering
which would again for reduction of costs.
 Instead of using the paid social media, it is better to go for the free tools. The
company should go for promotion of the event through email marketing ("Planned
Special Events: Cost Management and Cost Recovery Primer", 2019).
 The event staff could be volunteers. They are a great way of adding manpower to the
event without an extra cost. But his comes with a twist which is that there may be
some time needed in order to train these volunteers and then they must have an access
to the management to answer their questions or when there is something that goes
wrong. They could be entrusted with the responsibility of tasting food before the
guests arrive etc.
 It is better to plan the event when it is a season off, when there are not much events
that are taking place. For example, in the question, there are 2 events from which one
has to be chosen and there are 3 more events. So, if the company goes for the time
when there are not much events taking place, it would be better for it.
 Printing is expensive and so, printing must be very limited when it is absolutely
necessary. Technology could be used instead of paper. For example, an event app
could be used or some money could be invested in event technology to save printing
costs.
 Snacks and drinks should be eliminated in full. Let the guests step out and buy their
own food when they are hungry. This would help in reducing costs even more.

COST AND PERFORMANCE 12
 Sponsors should be invited to sponsor these events. The local businesses could be
approached for the purposes of buying some stake into the event. In return, the bill
boards for the event could have their logos so that advertising of their business is also
done.
 The company must invite vendors who could go for tenders. They could look for the
vendors that are willing to do the same amount of work at a lower cost.
 The company must prepare a budget so that the costs could be controlled. Further, the
track of these expenses must be kept so that no extra expense are incurred ("Event
Management: Preparing The Event Budget", 2019).
The following are the costs related with pricing:
 Number of visitors and exhibitors. When the number of visitors are more, the venue
required would be big
 Venue related costs
 Advertising costs (Colston, 2019).
Task 3:
The following table shows the profit under each event:
(Event 1: Trade show)
Particulars Amouns in $
Revenue:
Visitors
10,80,000.0
0
Exhibitors
40,500.0
0
(Assuming
exhibitors shall
also pay)
Total revenue
11,20,500.0
0

COST AND PERFORMANCE 13
Category
Projected
subtotal Expected costs
Venue related costs:
Location rental -
Event staff 26,400.00
30,222.0
0
Previous years
wages plus
superannuation
Different equipment rental 40,000.00
40,000.0
0
Decorations 2,00,000.00
2,20,000.0
0
Lighting 1,50,000.00
1,50,000.0
0
Additional signage 30,000.00
30,000.0
0
Speakers 12,000.00
12,000.0
0
Rock band performers fee 30,000.00
48,000.0
0
Video production 25,000.00
30,500.0
0
Chairs 12,000.00
18,000.0
0
Social media costs:
Twitter 2,500.00
2,375.0
0
Facebook 3,000.00
3,450.0
0

COST AND PERFORMANCE 14
Pinterest 1,200.00
1,380.0
0
Instagram 4,000.00
4,600.0
0
Google+ 2,500.00
2,875.0
0
Linkedin 3,000.00
3,450.0
0
Snapchat 750.00
862.5
0
Advertising:
Print 80,000.00
1,00,000.0
0
Outdoor 40,000.00
56,000.0
0
Radio 6,000.00
18,000.0
0
Television 10,000.00
10,000.0
0
Drinks 4,000.00
3,600.0
0
Snacks 6,000.00
6,720.0
0
Total Costs
7,92,034.5
0
Profit from event 3,28,465.5

COST AND PERFORMANCE 15
0
(Event 2: Yoga event)
Particulars Amouns in $
Revenue:
Visitors
9,76,000.0
0
Exhibitors
36,600.0
0
(Assuming
exhibitors shall
also pay)
Total revenue
10,12,600.0
0
Category Projected subtotal Expected costs
Venue related costs:
Location rental
40,000.0
0
42,000.0
0
Event staff
36,000.0
0
55,188.0
0
Previous years
wages plus
superannuation
Different equipment rental
45,000.0
0
45,000.0
0
Decorations
1,75,000.0
0
2,62,500.0
0

COST AND PERFORMANCE 16
Lighting
1,40,000.0
0
1,40,000.0
0
Additional signage
60,000.0
0
60,000.0
0
Speakers
42,000.0
0
47,040.0
0
Indian yoga music
16,000.0
0
24,000.0
0
Video production
18,000.0
0
21,960.0
0
Yoga mat
48,000.0
0
45,650.0
0
Social media costs:
Twitter
2,500.0
0
2,875.0
0
Facebook
3,000.0
0
3,450.0
0
Pinterest
1,200.0
0
1,380.0
0
Instagram
4,000.0
0
4,600.0
0
Linkedin
3,000.0
0
3,450.0
0
Advertising:
Print
4,800.0
0
3,600.0
0

COST AND PERFORMANCE 17
Outdoor
22,000.0
0
30,800.0
0
Radio
5,400.0
0
18,000.0
0
Television
2,000.0
0
10,000.0
0
Drinks
8,000.0
0
7,200.0
0
Snacks
7,000.0
0
7,840.0
0
Total Costs
7,94,533.0
0
Profit from event
2,18,067.0
0
7,92,034.5
0
7,94,533.0
0
Trade show Yoga event
Fixed costs
6,17,492.5
0
5,76,415.0
0
Variable costs
1,74,542.0
0
2,18,118.0
0
Contribution
9,45,958.0
0
7,94,482.0
0

COST AND PERFORMANCE 18
Number of
visitors and
exhibitors
8,300.0
0
8,300.0
0
Contribution per
visitor
113.9
7
95.7
2
Break even
5,417.9
9
6,021.8
4
The above table shows the calculation of break-even points.
The below table shows the calculation of profit margin in %:
Profit 3,28,465.50 2,18,067.00
Revenue 11,20,500.00 10,12,600.00
Profit
margin 29.31% 21.54%
On the basis of it, none of the events should be selected.
Conclusion: the first event is a trade show with which the company would be able to earn a
profit of $3, 28,465.50. This much more than the profit that the company would be able to
earn with the event 1. Hence, the first event must be chosen by the company.
Any business would want to earn profits so that it can undertake expansions and also, invest
in new companies and also undertake the development of the new products. This helps the
company in focussing more in moving out of their comfort zones. From the view point of
this, the company will need to keep some amount of profit aside so that the future expansion
could take place. And it is for this reason that the company will need to reduce the expenses
so that more income or more net profit could be earned. The more this amount of profit is, the
better it is for the company. It is imperative for the company to look for the ways through
which these expenses could be reduced. Some of the ways include looking for cheaper
venues instead of the well-known ones. From the point of view of the managerial accounting,

COST AND PERFORMANCE 19
the company incurs both the fixed costs and the variable costs. The company has to look for
the ways through which the variable costs could be reduced. The fixed costs are fixed in
nature in the sense that these would be incurred even if the company decides to abandon a
product.
In the given case above, the company would be hosting an event which proves to be more
profitable for it. Due to the fact that the event 1 which is the trade show is more profitable
than the yoga event, hence it must be chosen. The trade show earns an extra profit of
$(328,465-218,067) which equals to $110,398. This extra revenue would prove to be fruitful
for the company and hence, this is the event that has been chosen by it. Any business owner
would like to invest in the event that is able to give him more profits and since, this event is
the first event, this event must be chosen.

COST AND PERFORMANCE 20
References:
Bragg, S., & Bragg, S. (2019). Cost driver — AccountingTools. Retrieved 3 October 2019,
from https://www.accountingtools.com/articles/2017/5/4/cost-driver
Colston, K. (2019). How To Create Your Event Budget. Retrieved 3 October 2019, from
https://helloendless.com/how-to-create-your-event-budget/
Cost Driver - Know the Significance of Cost Drivers in Cost Accounting. (2019). Retrieved 3
October 2019, from
https://corporatefinanceinstitute.com/resources/knowledge/accounting/cost-driver/
Direct costs — AccountingTools. (2019). Retrieved 3 October 2019, from
https://www.accountingtools.com/articles/what-are-direct-costs.html
Event Management: Preparing The Event Budget. (2019). Retrieved 3 October 2019, from
http://www.leoisaac.com/evt/top545.htm
Planned Special Events: Cost Management and Cost Recovery Primer. (2019). Retrieved 3
October 2019, from
https://ops.fhwa.dot.gov/publications/fhwahop09028/fhwahop09028.pdf
Wilkinson, J. (2019). Cost Driver Definition | Choosing Cost Drivers | Cost Driver Examples.
Retrieved 3 October 2019, from https://strategiccfo.com/cost-driver/