Case Study: Accounting for Decision Making at Crystal Hotel Pty Ltd

This case study examines Crystal Hotel Pty Ltd's financial decision-making processes, focusing on how the hotel manages expenses through budgeting, buy-or-rent decisions, and market analysis. The analysis covers two key scenarios: the Wellness Centre project and a promotional event. For the Wellness Centre, the study evaluates the cost-effectiveness of buying versus renting machinery and plants, considering factors like initial costs, ongoing expenses, and technological changes. The event analysis uses CVP analysis to determine contribution margins, break-even points, and the number of tickets needed to achieve target profits. The study highlights the importance of strategic financial planning and the use of tools like CVP analysis to optimize profitability and make informed decisions. The conclusion emphasizes the need for companies to carefully analyze various options and leverage available tools and techniques for effective financial management.

RUNNING HEAD: Accounting for decision making
1
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................................................................................................................................8
Task 2................................................................................................................................9
Task 3..............................................................................................................................10
Task 4..............................................................................................................................11
Conclusion......................................................................................................................12
References.......................................................................................................................13

Accounting for decision making 3
Case overview:
In this case, Crystal Hotel Pty ltd has been studied and it has been found that how this
hotel manages every expense according to the budget and many cases of the company have
been resolved on the basis of budgets, buy or rent decision, market analysis etc. in this case,
many issues which has been faced by the company have been resolved and it has also been
described that which option is useful for a company at which time.
Task 1:
Through analyzing over the Wellness Centre project of the company, it has been
found that company has 2 options out of which either company could buy the machineries
from the market or could take it on rent. According to the analysis, it has been found that the
budget of the company is $45, 550. Further, the calculation has been done over both the
options to analyze the best option for the company.
Through evaluation it has been found that the buy option is good for a company as
company becomes the owner of the machinery and can use the machinery in any manner at
the same time, it has also been analyzed that buying option could be in disfavour of the
company as well as company could not make the changes in the machinery with the changes
in the technology (Sadler, 2003).
Whereas through evaluation, it has been found that the rent option is good for a
company as company could not make the changes in the machinery with the changes in the
technology at the same time, it has also been analyzed that buying option could be in
disfavour of the company as company could not use the machinery in any manner, company
wants to (Macintosh and Quattrone, 2010).
Through the calculation over the company, it has been analyzed that rent option is
much better than the buy option as company have to bear total $46,806 in case of buy option
whereas in rent option, company is just have to bear $12,159. And thus, it has been found that
the rent option is quite better than the buy option for the company.
BUY OPTION RENT OPTION
COST Discoun
ted
Residua
l Value
Servici
ng
Total
Cost
over
3
Discoun
ted
Value
Year 1
Discoun
ted
Value
Year 2
Discoun
ted
Value
Year 3
Total
Cost
over
3

Accounting for decision making 4
years years
Tread
mill (3
pieces
)
$18,1
71 $721 $1,546.
26
$18,9
96 $1,824 $1,740 $1,659 $5,22
3
Ellip
tical
Traine
r (2
pieces
)
$8,07
8 $321 $1,546.
26
$9,30
4 $935 $892 $851 $2,67
8
Exer
cise
Bike
(4
pieces
)
$13,3
28 $529 $1,546.
26
$14,3
45 $837 $798 $761 $2,39
7
Rowi
ng
Machi
ne (1
piece)
$2,72
3 $108 $1,546.
26
$4,16
1 $776 $740 $706 $2,22
2
TOTA
L
COST
$46,8
06
$12,5
19
Task 2:
In this case, NPV of the company has been analyzed to identify that whether the
company would be able to make the profits of not. It has been analyzed through this case that
company have started a gym for the visitors and company has two plans for the membership
one is basic and another one is full package. It has been analyzed through this study that the
inflow from both the packages would be different.
Further, it has been analyzed through the calculations that the total net present value
of this investment would be $3,96,752 which is quite higher and depict that this investment
option is a good option for the company. Company could invest into this project to higher the
return (Turner & Thayer, 2001).
Through the calculations, it is suggested to the company to invest the amount into this
new project as well as it has also been found that company must also entertain the external
visitors as it would help the company to enhance the cash inflow (Weygandt, Kimmel &
Kieso, 2009).

Accounting for decision making 5
Membership (Basic 40/month, Full
Package 81/month)
Member
ship
Project
Cash Outflow Cash Inflow
Net
Cash
Flow
Tax
After
Tax
CF
PV
Factor NPV
Year 0 $35,350
-
$35,3
50
-
$10,
605
-
$24,7
45
1 -
24,745
Year 1 $808 $2,22,200 $2,21,
392
$66,
418
$1,54
,974
0.9259
25926 1,43,4
95
Year 2 $808 $2,34,804 $2,33,
996
$70,
199
$1,63
,797
0.8573
3882 1,40,4
30
Year 3 $808 $2,48,382 $2,47,
574
$74,
272
$1,73
,302
0.7938
32241 1,37,5
72
NPV $3,96
,752
Task 3:
In this case, promotional activities of the company have been analyzed to identify that
whether the company would be able to make the profits of not by promoting their centre in a
good manner. It has been analyzed through this case that company have started a wellness
centre and now company is required to do some promotional events to promote the centre. It
has been analyzed through this study that various sources are available for the company to
promote their business.
Further, it has been analyzed through the analysis that company must invest into
promotional activities before considering the budget of the company as well as the feasibility
of the activities must also be analyzed (Ward, 2012).
Through the calculations, it has been found that following events are quite reasonable
as well as these events could take place in the budget of the company. Thus it could be said
that the following activities must be performed by the business.
Promotional Budget

Accounting for decision making 6
Item Price(excl
GST) GST Price (incl
GST)
Quantity
Required
Total
Budgete
d Value
The paramatta
times (Quarter
page strip)
1132 $113 $1,245 1 $1,245
Digital foyer
advertising
(weekly rate)
250.00 $25 $275 5 $1,375
Bus shelter
poster (trail
pannel)
$550 $55 $605 3 $1,815
Digital Billboard
(medium) 2500.00 $250 $2,750 1 $2,750
Printed Billboard $600 $60 $660 3 $1,980
Flyers $295 $30 $325 8 $2,596
Retail
advertising $358 $36 $394 8 $3,150
TOTAL $5,685 $569 $6,254 29 $14,91
2
Task 4:
In this case, it has been analyzed that for promoting the wellness centre, company has
performed an event and for this event the company has charged $ 80 per person for a night
out of which $ 35 is variable expenses of the company and the $ 45000 are the fixed cost of
the company (Bromwich and Bhimani, 2005).
It has been analyzed through evaluating these figures that the contribution margin of
the company is $45. The contribution margin ratio of this event is 44%. Further, it has been

Accounting for decision making 7
evaluated that the breakeven point of the company is 1000 units and $ 80,000. If the company
wants to earn $ 1,00,000 as a profit than company is required to sell 2222 units of the tickets
(Berger, 2011).
Further, it has been analyzed that the CVP analysis is quite effective for a company as
it assists the company to analyze the total variable and fixed expenses and according to which
company could evaluate that how much profits company could earn. In this case, it has been
analyzed that the company is capable to make the profits and it has also been analyzed that as
the contribution margin of the company is less so company is required to sell more units to
manage the profits and achieve the breakeven point.
CVP ANALYSIS
CM $ 45.00
CMR 44%
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 3
222

Accounting for decision making 8
Task 1:
Through analyzing over the Wellness Centre project of the company, it has been
found that company has 2 options out of which either company could buy the plants from the
market or could hire an expert for the plants. According to the analysis, it has been found that
the calculation has been done over both the options to analyze the best option for the
company.
Through evaluation it has been found that the buy option is good for a company as
company becomes the owner of the plants and can use the plants in any manner at the same
time, it has also been analyzed that buying option could be in disfavour of the company as
well as company could not make the changes in the plants with the changes in the weather.
Whereas through evaluation, it has been found that the rent option is good for a
company as company could not make the changes in the plants with the changes in the
weather at the same time, it has also been analyzed that buying option could be in disfavour
of the company as company could not use the plants in any manner, company wants to.
Through the calculation over the company, it has been analyzed that rent option is
much better than the buy option as company have to bear total $32,987 in case of rent option
whereas in buy option, company is have to bear $38,248. And thus, it has been found that the
rent option is quite better than the buy option for the company.
BUY OPTION RENT OPTION
Cos
t
Yea
r 0
Disco
unted
Servic
ing
Year 1
Disco
unted
Servic
ing
Year 2
Disco
unted
Servic
ing
Year 3
Tota
l
Cost
over
3
year
s
Disco
unted
Value
Year 1
Disco
unted
Value
Year 2
Disco
unted
Value
Year 3
Tota
l
Cost
over
3
year
s
Zami
oculcas
Zamiifol
ia (20
pieces)
$80
0 $12,050 $11,157 $10,331 $34,
338 $1,407 $1,303 $1,207 $3,9
17
Raphi
s
Excelsa
(10
pieces)
$1,3
60
$1,3
60 $2,546 $2,358 $2,183 $7,0
87

Accounting for decision making 9
Howe
a
Forsteri
ana (10
pieces)
$57
0
$57
0 $1,843 $1,706 $1,580 $5,1
28
Cham
aedorea
Elegans
(30
pieces)
$1,9
80
$1,9
80 $5,607 $6,056 $5,192 $16,
854
TOTAL $4,
710
$12,0
50
$11,1
57
$10,3
31
$38,
248
$11,4
03
$11,4
22
$10,1
61
$32,
987
Task 2:
In this case, NPV of the company has been analyzed to identify that whether the
company should buy the software or should subscribe it for a period of time. It has been
analyzed through this case that company is required to manage software and thus company
must choose an option of either buying the software or taking the subscription of the
software.
Further, it has been analyzed through the calculations that the total net present value
of the subscription would be $ 5,758 which is quite lesser than the total net present value of
the licence which is $7,695. So it could be depicted that this investment option (subscription)
is a good option for the company. Company could invest into this project to manage the
expenses (Ansari, 2004).
Through the calculations, it is suggested to the company to invest the amount into the
subscription of the software.
Licence Subscription
Membershi
p
Cash
Ouflow PV Factor
PV of
Cash
outflows
Cash
Ouflow PV Factor
PV of
Cash
outflows
Year 0 $6,900 1 $6,900 1 $0
Year 1 $300 0.92592592
6 $278 $2,172 0.92592592
6 $2,011
Year 2 $309 0.85733882 $265 $2,237 0.85733882 $1,918

Accounting for decision making 10
Year 3 $318 0.79383224
1 $253 $2,304 0.79383224
1 $1,829
TOTAL $7,827 $4 $7,69
5
$6,71
3 $4 $5,758
Task 3:
In this case, promotional activities of the company have been analyzed to identify that
whether the company would be able to make the profits of not by promoting their centre in a
good manner. It has been analyzed through this case that company had started a wellness
centre while ago and from that company is conducting many activities to promote the centre.
It has been analyzed through this study that for an event, it is required for a company to
manage various things and the quantity and the price of the items must be according to the
guest and the budget of the company (Atrill and McLaney, 2006).
Further, it has been analyzed through the analysis that the total budget of the company
is $ 20,500. In it, company is required to manage all the given items. Thus a market analysis
has been done and the product s has been taken on rent in the cheap price.
Through the calculations, it has been found that the following quantity must be bought
by the company for this event and the given price has been considered as a budget price to
buy these products.
Venue Costing
Item Price(excl
GST) GST Price (incl
GST)
Quantity
required
Total
Cost
Chair cover hire $8 $1 $9 300 $2,640
Gift hampers $15 $2 $17 10 $165
Open
entertainment $30 $3 $33 3 $99
Balloon
Canterpieces $5 $1 $6 30 $165

Accounting for decision making 11
Guest gifts $13 $1 $14 300 $4,290
Food $30 $3 $33 300 $9,926
Beverages $9 $1 $10 300 $2,970
AV system and
staging $0 $0 70 $0
Event staff rate $22 $2 $24 $0
$20,255
Task 4:
In this case, it has been analyzed that for conducting the corporate meeting in the
conference hall, company has charged $ 100 per person for a night out of which $ 40 is
variable expenses of the company and the $ 10000 are the fixed cost of the company.
It has been analyzed through evaluating these figures that the contribution margin of
the company is $60. The contribution margin ratio of this event is 40%. Further, it has been
evaluated that the breakeven point of the company is 167 units and $ 16,667. If the company
wants to earn $50,000 as a profit than the company is required to sells 1000 units of the
meeting tickets (Ansoff, 2007).
Further, it has been analyzed that the CVP analysis is quite effective for a company as
it assists the company to analyze the total variable and fixed expenses and according to which
company could evaluate that how much profits company could earn. In this case, it has been
analyzed that the company is capable to make the profits and it has also been analyzed that as
the fixed cost of the company is less so company is required to sell less units to manage the
profits and achieve the breakeven point.

Accounting for decision making 12
CVP ANALYSIS
CM $ 60.00
CMR 0.40
Break-even (units) 167
Break-even ($) $16,666.67
Number of units of
service required to earn
a target net profit of $
50, 000 1000
Conclusion:
Through this study it has been analyzed that the various choices are available for the
company for every activity, so it s required for the company to analyze every factor and make
the better choice accordingly. There are various tools and techniques which are available for
the companies to analyze the figures and market and through which company could make the
better choice in the company.
Through this case, it has been observed that if the company would make the better
choices than it would be better for the company to manage the expenses as well as it would
also help the company to enhance the profits.