Analysis of Management and Accounting Report for Qbic Hotel, Unit 5

This report provides a comprehensive analysis of management accounting practices at Qbic Hotel, a hospitality business in London. It begins with an introduction to management accounting systems, including cost accounting, inventory management, price optimization, and job costing systems. The report then delves into different management accounting reporting methods, such as budget reports, accounts receivable aging reports, and job cost reports, along with their respective benefits. It explores cost calculation techniques, contrasting marginal and absorption costing methods, and includes calculations for payback period, net present value, and internal rate of return. Furthermore, the report examines budgetary control, discussing zero-based and activity-based budgeting, their advantages, and disadvantages. Finally, it compares how the organization responds to different financial problems, providing a holistic view of Qbic Hotel's financial management strategies.

Management and Accounting
Unit 5

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ACTIVITY 1....................................................................................................................................1
P 1. MA systems.........................................................................................................................1
P 2. Different methods used for management accounting reporting...........................................2
P 3. Calculation of costs using different techniques of cost analysis .........................................4
ACTIVITY 2....................................................................................................................................6
Part A...............................................................................................................................................6
P 4. Benefits and limitations of budgetary control......................................................................6
Part B...............................................................................................................................................9
P 5. Comparison of how organization respond to different financial problems.........................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management Accounting is the process where the management uses the accounting
provisions in order to take better decisions for the organisation. It takes into account various
accounting such as Tax accounting, Financial accounting and Managerial Accounting. In this
Financial Accounting is the main for taking any decision related to the organisation because it
covers all the financial information of the company. Qbic Hotel is engaged in the Hospitality
industry and located in the city of London. Company was established in year 2009. Hotel is fully
having free WiFi facility and rooms are at affordable rates. In the hotel every room is fully
furnished and available with proper facilities. Hotel is also having a section of tea/ coffee and
different breakfast section.
ACTIVITY 1
P 1. MA systems.
Management accounting
Management accounting is an essential process which helps internal stakeholders of the
organization in providing timely information to the both financial and non- financial
management in taking strategic decision which helps in attainment of long term and short term
goal and objectives of the Qbic Hotel on time.
Management accounting systems
Managerial accounting system is an effective measure which evaluates the operations of
the business and also helps in controlling cost by taking strategic decision. The MA system helps
in forecasting the future, formulate plan, analyse variance and take necessary decision for future
growth and success of the company.
Cost accounting system
This system helps in analysing and estimating the cost of the products manufactured by
the company (Dale and Plunkett, 2017). It leads to higher profitability and growth for the
business. Cost system effectively determines the accurate cost of the each goods produces and
services rendered for accurate estimation of the profit.
Inventory management system
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This system of MA keeps a proper track of the level of inventory, orders, finished
products, sales and deliveries (Feiner, Polymer Logistics Israel Ltd, 2019). This also helps
management in determining the level of material required for producing particular products.
Price optimization system
This system help in determining the behaviour and attitude of the customer with the
change in the prices of the goods and services offered by the Qbic Hotel (Taleizadeh, Noori-
daryan and Cárdenas-Barrón, 2015). This system focuses on determining and estimating the best
price which will cater large customer base, higher market share and operational profit.
Job costing system:
This system of MA helps in accumulating and distribution cost of each individual unit of
production (Maskell, Baggaley and Grasso, 2016). This system helps in determining the cost of
various different products. This system effectively evaluates direct and indirect cost attached to
produce single unit of the output.
P 2. Different methods used for management accounting reporting
Management Accounting reports shows the complete picture of Qbic Hotel that how they
are performing through preparation of various reports such as budget report, Account receivable
aging report etc.
Budget report
Budget reports are prepared in order to know where the Qbic Hotels have allocated extra
costs. Budgets are compared with the actual performance of the company. By evaluating the
budgets whether they are over budget or under budgeted company takes necessary decisions
(Diouf 2017). Budgets are prepared on the basis of previous years actual performances for the
following year and finds out places to cut costs.
Account Receivable Aging Report
Preparation of this report is necessary for Qbic Hotels because they show that in how
many days company converts its debtors into cash. This report helps the company in adjusting
the credit policies to align them with the consumers' repayment capabilities. This report is very
crucial for all the companies because it shows the lack in the credit policy of the company.
Account Payment Aging Report
This report is prepared for knowing that in how many days Qbic Hotels pay to its
creditors. This report helps in the adjusting the credit policies of the company in order to know
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that how fast company can pay to its creditors and by doing this company can also reduce its
financial expenses (Bromwich 2016).
Job Cost Report
This report is prepared in order to calculate the total cost of the Qbic Hotels for every
room in the hotel. This report is prepared to evaluate the profitability of the company and to
know the total cost of the company in order to run the business. This report also shows the
overall profit of the company.
Inventory Report
This report is prepared to know the occupancy of the rooms in Qbic Hotels. On the basis
of this report company wants to know that in which month of the year rooms are fully occupied
and which month they are vacant. This helps the company in knowing that what are the reasons
of vacant rooms and how to attract more customers in those seasons (Maas 2016). This report
shows that in how many days company converts its inventory into sales.
Manufacturing Report
This report is prepared to know the total manufacturing cost of the Qbic Hotels. This
report covers overall cost of rooms, converting those rooms into furnished rooms. This helps the
company in knowing the total manufacturing cost of one room and what are the increase or
decrease in the cost over the years.
Benefits of MA systems
Cost accounting system: This system helps in improvising the operational efficiency of
the business by identifying non- profitable activities (Dale and Plunkett, 2017). It also helps in
price fixation by controlling the cost of the business and achieving economies of scale.
Inventory management system: This helps management in keeping proper track and
avoid under stocking and over stocking of the stocks (Feiner, Polymer Logistics Israel Ltd,
2019). This also helps in optimum utilization of resources and reduce wastage which is
beneficial in future growth of Qbic Hotel.
Price optimization system: This system helps company in effective and viable pricing
decision which aids to price optimization and attainment of better economies of scale
(Taleizadeh, Noori-daryan and Cárdenas-Barrón, 2015).
Job costing system: This system helps in determining and tracking the team performance
of the each job of the company which helps in reducing cost and increasing productivity
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(Maskell, Baggaley and Grasso, 2016). This also helps in evaluating and prioritizing the most
profitable job for higher operational efficiency.
Management accounting system in MA reporting in integration with the organization.
(Maskell, Baggaley and Grasso, 2016) established the fact that, MA system helps in
taking strategic decision which result in higher operational standard and efficiency. This helps
management in controlling the various activities of the operations for long term success. (Dale
and Plunkett, 2017) argued that, management accounting system leads to personal biasses and
manipulation of data which eventually results in ineffective decision making. (Bromwich 2016)
sought to analyse the fact that, MA reporting helps in assessment of the performance of the
company and comparing the actual with the past results for effective decision making. (Maas
2016) argued that, MA reporting is a time consuming process and it does not always give
accurate results as it dos not take into consideration qualitative data.
P 3. Calculation of costs using different techniques of cost analysis
Marginal Costing is the costing where all the variable expenses are charged under the
income statement while all the fixed expenses are charged after the contribution (Labro 2019).
Under this method, valuation of closing inventory is by marginal cost per room in which only
variable expenses of Qbic Hotels of each room is accounted.
Absorption Costing is the costing where all the fixed and variable production cost are
charged before Gross Profit and Variable & Fixed selling, administrative cost per room is
charged after Gross Profit (Geiszler 2017). Under Absorption costing, the valuation of closing
inventory is calculated on Absorption cost per unit. Absorption Cost per unit is calculated by
taking all the fixed and variable costs. It includes the total cost absorbed by the company in
production of one unit of company.
Annexure C
Computation of payback period
Year Project X
Cumulative cash
inflow (X) Project Y
Cumulative
cash inflow (Y)
1 2500 2500 1500 1500
2 1000 3500 2000 3500
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3 1000 4500 2500 6000
4 500 5000 1000 7000
5 1500 6500 1000 8000
6 1000 7500 2500 10500
Calculation of net present value
Year
Project
X
Project
Y
P V @
12%
Discounted cash
inflow (X)
Discounted Cash
Inflows (Y)
1 2500 1500 0.893 2232 1339
2 1000 2000 0.797 797 1594
3 1000 2500 0.712 712 1779
4 500 1000 0.636 318 636
5 1500 1000 0.567 851 567
6 1000 2500 0.507 507 1267
Total
discounted
cash inflow 5417 7183
Less: initial
investment 5000 8000
Net present
value 417 -817
Internal rate of return
Year Project X Project Y
0 -5000 -8000
1 2500 1500
2 1000 2000
3 1000 2500
4 500 1000
5 1500 1000
6 1000 2500
IRR 15% 8%
Qbic Hotels should select Project X because in all the criteria of selection Project Y is
better than Project Y. Project X is having pay back period of 4 years and its net present value is
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also positive and higher than Project X. Project X is having higher internal rate of return as
compared to Project Y which shows that the company should go for Project X only.
ACTIVITY 2
Part A
P 4. Benefits and limitations of budgetary control.
Budgetary control is an effective tool which helps in determining and evaluating the
actual results with the budgeted plan in order to determine the variances to take necessary
corrective actions.
Zero based budgeting (ZBB)
It is an important budgeting tool which helps in estimating all the expenses for the
particular period from the scratch which helps in determining the budget from the zero base
without considering any past expenses (Ibrahim, 2019). It helps in building the accurate budget
for the future period regardless of the fact that the budget was high or low in the previous period.
This helps in analysing the needs of every function in Qbic Hotel and also assign cost for smooth
functioning of the business.
Advantages of Zero based budgeting
This planning tool helps in determining the cost for the future without predicting any past
projected budget plan. There is a complete accuracy because it helps in determining the cost and
expenses for the particular period and does not take into consideration any flaws and drawback
from the past period which helps in controlling cost and effective utilization of resources.
Disadvantages of Zero based budgeting
It is a very time consuming process because the budget has to be prepared from the
scratch (Mahieu, Vroman and Calluy, 2015). ZBB leads to major communication and
administration problems because mangers oppose to use mew ideas and models in the business
which leads to higher conflict in decision making.
Activity based budgeting
This budgeting tool focuses on evaluating the cost of the various activity of the Qbic
Hotel which helps in making various effective refinements in cost planning and expenses to carry
out the particular activity in the organization (Tan and Low, 2017). Controlling the activity levels
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helps in increasing the revenue for the business by enhancing the cost structure of the Qbic
Hotel. This tool helps management in determining the cost of carrying out a particular activity.
Advantages of Activity based budgeting
This planning tool helps in reducing cost of the business and attaining higher economies
of scale which in turn result in higher sales and profit. This tool helps in accurate and viable
prediction of cost attached with goods and services and also helps management in better
understanding of the overhead cost attached with activity (de Jong and Ho, 2019). It also
beneficial in determining the profitable and non- profitable activity of the business.
Disadvantages of Activity based budgeting
This budgeting tool is costly to hold up which result in higher operational cost and lower
profits. Activity based budgeting can be easily misinterpreted and also leads to personal biasses
which result in ineffective decision making. This planning tool is only applicable when company
is producing large products and rendering various services. This budgeting tool does not copmly
with GAAP (Advantages, Disadvantages and Limitations of Activity Based Costing (ABC)
System, 2011).
Flexible budgeting
This budgeting tool can be easily adjusted with the change in the volume of the business
activity. The budget plan does not remain static and can be easily changed with the change in the
variable unit of the activity (Brusca and Labrador, 2016). This tool takes into consideration
revenue and expenses for the particular period of production.
Advantages of Flexible budgeting
This tool is flexible and the budget can be changed according to the particular variance in
the volume of the production. This tool is beneficial for the management in predicting the best
and worst case scenarios. This study also helps in improving the operational efficiency of the
business by controlling cost. This tool takes into consideration variable cost which helps in
evaluating accurate cost and expenses for the particular set of period.
Disadvantages of Flexible budgeting
This tool is more confusing and complex as it requires crucial planning and track
expenses to adjust the same in the particular accounting period of the Qbic Hotel. Internal
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management of the company can also manipulate the data by personal biasses which makes the
data inaccurate and irrelevant.
Operating budgeting
This planning tool helps in projecting the revenue of the Qbic Hotel which are associated
with the expenses for future financial period (Surianti and Dalimunthe, 2015). This budgeting
method evaluates the expenses and cost of the company in order to evaluate the profitability and
operational efficiency of the Qbic Hotel. This budgeting tool effectively evaluates the expenses,
future cost and future expenses of the company which leads to higher operational productivity
and performance.
Advantages of Operating budgeting
This planning tool helps management of the organization in planning out day to day
operations of the enterprise, so that the management do not run out of funds. This tool is also
beneficial in tracking the actual expenses and forecasting future expenses. This stool helps in
building effective business investment plans and promoting accountability for future growth and
development of the Qbic Hotel. This helps managerial of the organization in determining all the
cost related to the operations of the company.
Disadvantages of Operating budgeting
This tool does not help in accurately allocating cost for the short period. This is a time
consuming and a complex process which results in delay in decision making. The major
limitation attached with this tool is that it leads to personal biasses and manipulation of data.
Use and application of budgetary tools
ZBB is useful in determining all the expenses and cost to make the budget for the future
period from the scratch. This is prepared by evaluating and justifying all the expenses in a
particular department (Mahieu, Vroman and Calluy, 2015). Activity based budgeting is useful as
it effectively evaluates the profitable and non- profitable activity of the Qbic Hotel (Tan and
Low, 2017). Application of this tool helps in prioritizing the activity in order to generate higher
profits. Flexible budgeting is useful because it helps budget to adjust to the changes such as
unexpected cost and expenses incurred, variation in income, etc. Application of this tool helps in
determining the expenses of the business and compare it with actual for effective decision
making (Brusca and Labrador, 2016). Operating budget tool helps in tracking the income and
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expenses by effectively evaluating the operations of the business (Surianti and Dalimunthe,
2015). Application of this tool in Qbic Hotel helps in evaluating the post profitable department in
the organization.
Part B
P 5. Comparison of how organization respond to different financial problems.
Benchmarking: The key financial problem associated with Qbic Hotel is that it has large
number of competitors present in the market which results in lower market share and growth for
the company.
Benchmarking is the financial process which helps in differentiating various products,
services, policies, procedure and process of the company with the other forms in order to set the
standards and determine the actual cause of the problem (Madsen, Slåtten and Johanson, 2017).
Benchmarking is an effective process of identifying various opportunities for future growth and
improvement. This helps in determining the actual performance of the business by setting
benchmark with the best standards. This technique helps in achieving the best results by setting
specific standards and controlling cost of the business to reach greater heights (Pavlatos and
Kostakis, 2015). This tool helps in setting benchmark with its competitors in order to overcome
this financial problem and attain effective market position for future growth and expansion.
Key performance indicator: The key financial problem associated with Rocco fort hotel
is that it has reduction in sales volume which eventually leads to slower generation of revenue
and profits.
Key performance indicator is an effective metrics which helps in determining the
performance of the company and leads to improved success in order to reach higher goals and
standards (Rajnoha and Lesníková, 2016). It helps in achieving the goals and objectives of the
company and critically evaluate the success of reaching desired target. High level KPI critically
evaluates the overall performance of the company and the low level KPI focuses on departments
of the organization. It helps in monitoring the financial performance to evaluate the level of
productivity for higher growth and success of the Rocco fort hotel (Van Dooren, Bouckaert and
Halligan, 2015). It helps company in evaluating how the company will help in achieving the set
target for higher operational standards and productivity.
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Variance analysis: The key financial problem associated with four seasons is that it has
lack of resources and raw material which leads to lower operational productivity and efficiency.
Variable analysis helps in critically evaluating the performance of the company in order
to investigate the higher operational standards (Banerjee, 2019). This method help in determining
the variances and deviation in order to evaluate the budgeted plan with the actual results. This
tool helps in evaluating the cause of the variance and take necessary action to optimally utilize
the resources and funds for substantial growth (Hieu and Dung, 2018). It helps on finding the
cause of deviation and effectively understand the cause of fluctuations which results in adverse
variance.
Responding to financial problems leads to higher organizational success
Financial governance: This technique is an effective tool which helps company in
determining, formulating, managing, evaluating, observing and controlling in order to track the
performance of the Qbic Hotel (Honggowati and et.al., 2017). Financial governance keeps a
proper track of the various financial transactions and also manages the activity of the
performance. It also keeps a proper track and evaluate whether the company comply with various
laws and standards such as GAAP and IFRS (Soobaroyen, Tsamenyiand Sapra, 2017). It also
focuses on proper disclosures of statements on time for smooth functioning of the Qbic Hotel.
Planning tools in resolving financial problems
Planning tools helps in resolving various financial problems of the organization. ZBB
tools helps in determining the projected budget plan by evaluating the expenses for the future. It
helps in accurate estimation of the expenses which leads to optimum utilization of funds and
resources (Mahieu, Vroman and Calluy, 2015). Activity based budgeting helps in accurate
prediction of the cost of each activity which eventually result in reduction in wastage and cost
control. Flexible budgeting considers variable cost into the business and is not static which result
in setting budget with the change in the volume. This system helps in setting accurate cost and
expenses which helps in higher generation of revenue and profit (Surianti and Dalimunthe,
2015). Operating budget helps in resolving financial issues of the company as it will help in
forecasting the operations of each department.
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CONCLUSION
The report is summarized as shows the various aspects of the management accounting
and the various reports which are prepared under the management accounting reports. These
reports are prepared in order to present the various statements which shows the Qbic Hotels
financial statements. It also shows the various calculation of various cost of to know profitability
of the Qbic Hotels. The company has also used various criteria while selecting the best project in
which Qbic Hotels should invest because investing in that project will be giving higher profits to
the company.
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through:<http://www.accountingexplanation.com/advantages_disadvantages_and_limitatio
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