Bachelor of Tourism and Hospitality Management
2019-SEM1-THH3113 Cost and Performance Management for Tourism and Hospitality
Assessment Task 3: Individual Assignment
Assessment of the assignment is based on the adequacy and accuracy of the submitted assignment.
For all written work students must ensure that they submit their own original work. Any act of plagiarism will be severely penalised.
fully reference the source(s) of all material, even if you have re- expressed the ideas, facts or descriptions;
acknowledge all direct quotations; and
Not submit work that has been researched and written by another person.
Your work will be assessed in terms of the following criteria:
Certain aspects of these questions may require some assumptions to be made. Therefore, different answers are very acceptable. For ease of marking please specify these if you think it clarifies your decisions and responses.
Your assignment must be submitted into the Turnitin drop box on LMS.
THH3113 COST AND PERFORMANCE MANAGEMENT FOR TOURISM AND HOSPITALITY (2019 Sem 1)
The Elephant Hotel was first opened as the Prince Consort Hotel in 1888. The Hotel was refurbished in 2013 and is comprised of a large public bar with full facilities, dining room, beer garden, bottle shop - the Valley Wine Shop, located on the corner of Brunswick & Wickham streets. Of Queensland Australia.
The owners of The Elephant Hotel BOB & BIB have successfully gained their new trading license for their new hotel in Fortitude Valley Queensland and they have a lot of competitors to compete with. BOB & BIB are very concerned about their business that they might succeed only if they cut done on their costs. They want to compare their budgeted expenses and income statement and see how they have performed in the basis of cost management when compared to previous year and current year.
They want to be proactive thus forecast and decide for any extra costs that they might incur in running their new branch. As their current revenue manager for their Old branch you are approached to evaluate factors affecting value perceptions in food services.
BOB & BIB are sure that you can help them to point out the cost drivers and evaluate management cost drivers that measure performance of the cost control
The extract of The Elephant Hotel is below which you should use for your analysis.
Income & Expenses Statement for The Elephant Hotel for the year ended 30th June 2018
INCOME & EXPENSES
INCOME & EXPENSES
|Sale From Bar||$245,000.00||$250,000.00|
|Casual employee wages||$180,625.00||$187,500.00|
|Cleaning & cleaning products||$1,215.00||$1,620.00|
|Credit card commission||$16,192.50||$13,590.00|
FOOD DELIVERY Vehicle service
|kitchen utensils hire||$1,350.00||$1,250.00|
Permanent full time employees
|Public liability insurance||$945.00||$1,260.00|
|Repair & maintenance||$12,531.50||$9,375.00|
|Superannuation for employees||$47,084.38||$47,737.50|
|Website hosting expenses||$2,995.31||$3,993.75|
|Month Net Profit / (Loss)||$51,431.94||$31,651.25|
NOTES FOR THE NEW SHOP RUNNING EXPENSES
months of December that has increased the repair expenses (this was mainly because of poor record keeping for the equipment’s maintenance)
1. The management has implemented some strict waste reduction measure as a result the waste removal charges have decreased
(YOU CAN ALSO DOWNLOAD THIS EXCEL FILE FORM THE LMS)
Analysis and Report (30 marks. Approximately 1250 – 1500 words)
2. Cost Control: (5 Marks)
Identify and evaluate cost control areas and recommend how they can control them in future by better cost management
3. PERFORMANCE ANALYSIS (VARIANCE): (10 Marks)
Perform a variance analysis on the following report and discuss about the variances in performance when compared to their budget.
4. Cost and Revenue Analysis: (10 Marks)
Recommend on how Bob and BiB should handle his sales Show More
With the changes in economic condition, each and every organization needs to strengthen the business position by focusing the allocation of the costing in the different process and reducing the overall business costing. It is analysed that a market study should be conducted to identify the cost drivers and cost pool associated with the business process system. The cost control analysis and allocation method helps in understanding the key revenue drivers of business which need to be kept at utmost priority. The cost and revenue drivers helps in allocation of the business costing in the different department to identify the true costing value of the particular process.
The cost control areas identified for business are as follows:
The recommendations desired for the control of costs related to these cost control areas are as follows:
|Income & Expenses Statement for The Elephant Hotel for the year ended 30th June 2018|
|PARTICULARS||ACTUAL INCOME & EXPENSES||BUDGETED INCOME & EXPENSES||VARIANCE IN THE ACTUAL AND BUDGETED||PERCENTAGE CHANGE|
|Sale From Bar||$245,000.00||$250,000.00||($5,000.00)||-2.00%||Unfavourable|
|Casual employee wages||$180,625.00||$187,500.00||($6,875.00)||-3.67%||Favourable|
|Cleaning & cleaning products||$1,215.00||$1,620.00||($405.00)||-25.00%||Favourable|
|Credit card commission||$16,192.50||$13,590.00||$2,602.50||19.15%||Unfavourable|
|FOOD DELIVERY Vehicle service costs||$3,937.50||$4,050.00||($112.50)||-2.78%||Favourable|
|kitchen utensils hire||$1,350.00||$1,250.00||$100.00||8.00%||Unfavourable|
|Permanent full time employees wages||$315,000.00||$315,000.00||$0.00||0.00%||Favourable|
|Public liability insurance||$945.00||$1,260.00||($315.00)||-25.00%||Favourable|
|Repair & maintenance||$12,531.50||$9,375.00||$3,156.50||33.67%||Unfavourable|
|Superannuation for employees||$47,084.38||$47,737.50||($653.12)||-1.37%||Favourable|
|Website hosting expenses||$2,995.31||$3,993.75||($998.44)||-25.00%||Favourable|
|Month Net Profit / (Loss)||$51,431.94||$31,651.25||$19,780.69||62.50%||favourable|
The variance existent between the performance of business on budgeted and actual terms for 2017-18 financial years is depicted by the above the table. The actual revenues for business have rose by 2.22% against the actual performance, while the total expenses fell by 0.74%. the both directions of the performance parameters are favourable for business. This small change in the revenues and expenditures has led to a favourable change in the net profits drastically. The budgeted profits rose by almost 63%.
The cost control areas identified earlier are also observant in the variance analysis. the rise in the repair and maintenance expense from the budgeted reserve is around 34%. The advertising expense is high by 26% approximately from the budgeted ground. The waste removal strategies have however led to reduction in the waste removal expenses by 11% approximately (Raguseo, Neirotti, & Paolucci, 2017).
The expense upon the property insurance has dropped by 25% due to change in the area of the company’s operations. The bank charges also fell by 25% due to the lowered number of banking transactions of business. The changes in rest other expenses is also visible form the variance analysis presented.
The sales can be handled well by Bob and BiB without increasing costs by handling the sales cost in an efficient manner. A proper check of the areas that lead to cutting the sales revenue by hurting the customer desires must be made. This analysis shall help in understanding the key revenue drivers of business which need to be kept at utmost priority. A target customer market which is already being approach and is expected to be approached must be first defined. This key market area shall help in determination of the product changes required and the policies which business need to undertake to bring an improvement in the business handling (Singh, Marinova, Singh, & Evans, 2018).
The profit margin for business and the expected sales can only be determined with utmost perfection when an idea about the product reach is close to certain. In accordance with the target market and the reach of market, the sales resources are to be allocated to get the maximum benefit out of the least costs. Handling of sales is also dependent largely upon the kind of sales channel advertisement methodology used in the business by The Elephant Hotel. Based upon the target market preferences and access an appropriate method to promote the company’s reach to its customers must be decided and implemented (Baguley, & Andrews, 2016).
Moreover, the most important aspect recommended to handle the sales is generation of a proper feedback system in the hotel to know the consumer grievances and deal with them appropriately. The consumer complaints when dealt appropriately results in consumer loyalty and repetitive service use by them.
After assessing all the details, it could be inferred that the profit margin for business and the expected sales can only be determined by using the cost drivers and set cost pool of the business. It is analysed that if company wants to sustain in market then it will have to focus on increasing the overall business outcomes and turnover. However, sales should be increased to the point where company has least total cost. Nonetheless, variance analysis is used to identify the true difference between the actual and expected results. The variance existent between the performance of business on budgeted and actual term throughout the time However, the comparison is made in the same time line with the set budget.