Unit 2 Finance in Hospitality Industry

Unit 2 Finance in Hospitality Industry

Introduction

The first part of this assignment focuses on the importance of various sources of finance and the impact they have on the organization as a whole. In the later parts importance has been laid on various methods of costing and how decisions are taken based on such methods.

Task 1

1.1 Review the sources of findings available to business and service industries.

1.2 Evaluate the different sources of income that could possibly be generated from this theme park.

Task 2

2.1 Identify examples of direct costs, indirect costs, fixed costs and variable costs incurred by Hotel Icon and Upper House.

2.2a. Calculate the break-even level of output for the previous year.

2.2b. How much profit did the s souvenir shop make last year by selling puppets

2.2c. How many more puppets would they have to sell to make a profit of 50000, if the selling price was unchanged?

2.2 d. Evaluate the limitations of cost-volume-profit analysis.

2.3 Firms in the travel and tourism industry can follow different pricing strategies to achieve profit. Analyse the different pricing strategies that can be followed by Icon and Upper House, taking into account the conditions they are currently operating in.

2.4 Evaluate how the management of the souvenir shop would control their stock and cash flow.

Task 3

3.1 The restaurant at Icon has requested a supplier to quote the price for the supply of caviar. The supplier has prepared the following standard cost information for a batch of caviar.

Calculate the direct material price and usage variance

Calculate the direct labour rate and efficiency variance

Explain the possible reasons why these variances may have occurred

3.2 You have been recently appointed as a financial consultant at the Icon restaurant to assist non-finance managers. At a staff meeting you have been asked to explain the following;

(a) The source and structure of the trial balance

(b) Discuss the budgetary control process and how this process helps management decision making at Icon Hotel.

(c) The usefulness of the business accounts and the significance of the notes to the accounts that may often be used in their annual accounting statements.

Task 4

4.1 Calculate the following ratios and analyse the performance of the hotel for the last two years

1) Calculation of Return on Capital Employed(ROCE)

2) Calculation of Gross Profit ratio

3) Calculation  of Stock Turnover ratio(STR)

4) Debtors Collection Period (Debtors Days)

5) Creditors payment Period

4.2 Suggest future management actions and strategies based on your analysis above

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