Answer :

Costing method 

1. Introduction 

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. 

2. Identify and evaluate cost control areas and recommend how they can control them in future by better cost management.

The cost control areas identified for business are as follows:

• Materials: the cost related to material is crucial for The Elephant Hotel. The easte reduction measures which have led in reduction of costs can further be dragged strong to reduce the cost on waste more. Also the areas where material is being used inefficiently have to be identified. Cost control is also required in the area of poor handling of material leading to the wastage generation (Nowak, 2016).
• Sales costs: the costs incurred on generation of sales are an important area for cost control. The company has incurred extra advertising efforts leading to rise in actual costs on advertising than the budgeted (Chen, Chen, Zhang, & Xu, 2018). 
• Repair and maintenance: improper record of the business equipments is maintained by The Elephant Hotel. This has led the organisation to have insufficient idea about the condition of the equipment and the handling and maintenance required for them from time to time to prevent the excessive repair and maintenance costs. This area demands controlling of the costs (Patiar, 2016). 

The recommendations desired for the control of costs related to these cost control areas are as follows:

• A market study should be conducted to identify the different suppliers of the hotel supplies to entertain purchases at least costs. The production process is also required to be evaluated to understand the loopholes leading to generation of high wastage.
• A cost benefit analysis should be undertaken before finalising the sales expenditures. Only those advertising and marketing expenses must be entertained that actually results in increment in sales.
• Records related to the fixed assets must be maintained since the day acquisition is made. records must be updated regularly to incorporate the changes in them relating to impairment, amortisation and depreciation. Also regular physical verification of the assets must be undertaken for identification of their working and economic condition.

3. Perform a variance analysis on the following report and discuss about the variances in performance when compared to their budget.

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.

3. Recommend on how Bob and BiB should handle his sales without compromising on cost in the future.

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. 

Conclusion 

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.