Finance & Funding: Management Accounting in Travel & Tourism Sector

This report delves into the various types of management accounting information utilized by business firms, particularly within the travel and tourism sector, for effective decision-making. It highlights key areas such as budgeting (including incremental, fixed, and zero-based budgeting), variance analysis, and break-even analysis, explaining their processes and importance. The report further elaborates on how these management accounting tools serve as crucial inputs for managers in making informed business decisions. Budgeting helps in setting targets and devising strategies, variance analysis aids in identifying areas needing improvement by comparing actual and estimated values, and break-even analysis assists in determining sales targets to cover costs and achieve profitability. The document also includes a list of references for further reading and research. Desklib provides access to this and other solved assignments to support students' learning.

TASK 2

2.1 Different type of management accounting information that can be used by the
business firms
• There are varied sort of management accounting information that can be used by the firms for making decisions in respect to
business. Some of these management accounting information are explained below.
• Budget: In the budget cash inflow and outflow related elements are listed and by viewing it, it is clearly identified that to what
extent expenses need to be controlled in the business. There are varied sort of budget and for each of them specific process
need to be performed. For example if one intends to prepare incremental budget then first of all one need to estimate rate at
which sales value may grow in the future time period.

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• In this regard first of all economic research will be carried out and on that basis direction in which economy may go is identified.
Thereafter, expenses percentage of sales is calculated and by doing so projection is made about expenses. In this way, incremental
budget is prepared. Finally, incremental budget is forward by the managers to the seniors for evaluation purpose.
• In case of fixed budget there is no process and same values are taken in to account each year for cost control (Baumol and et. al.,
2012). Zero based budgeting is the another approach that is taken in to account for preparing budget in respect to the company.
Under zero based budgeting also specific process is followed and under this department heads prepare their own department
budget first of all and then same is given to senior managers for evaluation purpose. Thereafter, actual allotment of cash is done to
relevant departments.

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• Variance analysis: Variance analysis is another management accounting information that can be used by the firms to make decisions. By
making comparison of facts decisions are made by the firms. By using variance analysis information managers can channelize their
efforts in the specific direction and can handle condition in proper manner.
• Break even analysis: It is another important method that is commonly used by business firms. By using this method it is identified that
how much sales need to be made to handle the situation (Bebbington and Thomson, 2013). Thus, it can be said that break even analysis
method have significant importance for the firms.
• On basis of breakeven analysis pricing related decisions are also taken by individuals. Apart from this, it is also determined that how
many units must be sold in the market in order to achieve the target. Thus, it can be said that break even analysis approach is the one of
the most important approach that can be used by the firms.

2.2 Use of management accounting information as decision making
tool
• Budget: Budget is the one of the management accounting information that is used by the firms for making business decisions.
There are wide variety of budgets that are prepared by the firms like incremental budget, fixed and zero based budget.
Companies according to their requirements must prepare budget. It can be observed that budget clearly lay down targets for the
companies and managers in order to achieve these targets prepare some strategies that can assist them in making business
decisions. Thus, it can be said that management accounting information provide input to the company which assist managers in
making decisions.

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• Variance analysis: It is the approach under which actual and estimated values are compared with each other. On basis of comparison it is
identified whether Travel and tourism firm perform good or bad in the business (Choo. and Tan,, 2011). Thus, by doing so areas where
improvement need to made are clearly identified. Travel and tourism firm can prepare budget on monthly basis and can work on area where
immediate attention is required. Thus, it can be said that variance analysis method assist firms in making business decisions on time and in
proper manner.
• Break even analysis: Break even analysis is the approach under which it is find out that how many number of customers need to be made in
the business so that cost can be covered in the business. Mangers by viewing output of breakeven analysis identify whether it is difficult or
easy to achieve breakeven point. Apart from this, profit target is also taken in to account while making decisions. By taking in to account both
these factors new sales target is determined. Thus, in this way break even analysis method help firms in making business decisions.

REFERENCES
• Garrison, R.H. and et.al., 2010. Managerial accounting. Issues in Accounting Education. 25(4). pp.792-793.
• Li, S., Blake, A. and Cooper, C., 2010. China's tourism in a global financial crisis: a computable general equilibrium approach.
Current Issues in Tourism. 13(5). pp.435-453.
• Papatheodorou, A., Rosselló, J. and Xiao, H., 2010. Global economic crisis and tourism: Consequences and perspectives.
Journal of Travel Research. 49(1). pp.39-45.

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