Finance in hospitality sector

Higher National Diploma in

Hospitality MANAGEMENT

Unit Title: Finance in the Hospitality Industry


Assignment Title: Assignment 2














 

Student Name & Number

 
 

 
 

Unit Lecturer:

 
 

 
 

Group:

 
 

September 2016
 

Issue Date:

 
 

07/11/2016
 

Draft Submission:

 
 

15/12/2016
 

Final Submission:

 
 

08/01/2016
 

IV Name & Date:

 
 

 


 

Unit Learning Outcomes:

 
LO3 Be able to evaluate business accounts

LO4 Be able to analyse business performance by the application of ratios

LO5 Be able to apply the concept of marginal costing.

 


Assignment Brief:
You have decided to open up a bar/restaurant/small hotel in London. You would like to open up one business initially and then, once established open more in the Greater London area.

You need to prepare a report to potential investors on how you plan to fund this and how you would price your products.

 


Submission Format 
Some of the learning outcomes of the assignment can be achieved on completion of workbook in the class. Rest of the learning outcomes can be achieved as an individual informal report. In the report, you must support your conclusions using secondary research and should reference your work where appropriate using the Harvard referencing system and include a list of references in your bibliography.

An electronic copy of the informal report must be submitted to the Turnitin software by required deadline on the top sheet.

Your report must be submitted via Turnitin.

Class ID:3015462

Password:maggie

 













Key Task:
3.1 Assess the source and structure of the trial balance 


 

 
Task 1: Assess the source and structure of the trial balance by considering the following points:

·         Summary of accounts from sales, purchase and nominal 
ledgers 

 

3.2 Evaluate business accounts, adjustments and notes 


 

 
Task 2: Evaluate business accounts, adjustments and notes by considering the following points:

 

·         Trading and Profit and Loss accounti.e. Sole Trader

·         Balance Sheeti.e. Sole Trader

·         Adjustments for depreciation

·         Accruals

·         Prepayments

·         Bad debt provision

·         Format i.e. Vertical

·         Double Entry

·         Appropriation Account

·         Asset, Liabilities, Capital ( Fixed, Current)

·         Notes to Accounts

 
3.3 Discuss the process and purpose of budgetary control 


 

 
Task 3: Discuss the process and purpose of budgetary control for profit and cash budgets by considering the typese.g. profit, cash flow, operating, master;
 

3.4 Analyse variances from budgeted and actual figures, offering suggestions for appropriate future management action 


 
Task 4: Analyse variances from budgeted and actual figures and offer suggestions for appropriate future management action by considering sales, cost and profit variances.

4.1 Calculate and analyse all ratios to offer a consistent interpretation of historical business performance

4.2 Recommend appropriate future management strategies for a given business and services operation

 

 
Task 5: Calculate and analyse the following ratios to offer a consistent interpretation of historical business performance and recommend appropriate future management strategies on the basis of those:

·         Profitability ratios: Gross and Net profit; Return On Capital Employed (ROCE)

·         Liquidity ratios: Current Ratio; Acid test
5.1 Categorise costs as fixed, variable and semi-variable for a given scenario.

5.2 Calculate contribution per product/ customer and explain the cost/profit/volume relationship for a given scenario.

5.3 Justify short-term management decisions based on profit/loss potentials and risk (break-even) calculations for a given business and services operation.
Task 6

a) Categorise costs as fixed, variable and semi variable for a given scenario.

b)Calculate contribution and explain the cost/profit/volume relationship for a given scenario.

 

c) Justify short term management decisions based on break even calculations considering profit/loss potentials, selling price and discounting

 



















GRADING CRITERIA

THIS ASSESSMENT TASK GIVES YOU THE FOLLOWING GRADING OPPORTUNITIES
Grade Criteria at a Pass:
Assess the source and structure of the trial balance
Evaluate business accounts, adjustments and notes
Discuss the process and purpose of budgetary control
Analyse variances from budgeted and actual figures, offering suggestions for appropriate future management action
Calculate and analyse all ratios to offer a consistent interpretation of historical business performance
recommend appropriate future management strategies for a given business and services operation
categorise costs as fixed, variable and semi-variable for a given scenario
calculate contribution per product/customer and explain the cost/profit/volume relationship for a given scenario
Justify short-term management decisions based on profit/loss potentials and risk (break-even) calculations for a given business and services operation
Grade Criteria at a Merit - In addition to the above Pass Criteria:
M1 - Identify and apply strategies to find appropriate solutions – complex research analysis approaches have been explored to find appropriate solutions for the research findings regarding business accounts, ratio analysis and marginal costing.
M2 - Select/design and apply appropriate methods/ techniques – the design of methods /techniques has been justified for business accounts, ratio analysis and marginal costing.
M3 – Present and Communicate appropriate findings – the given submission formats above have been used correctly and the required technical language has been accurately used
Grade Criteria at a Distinction - In addition to the above Merit criteria:
D1 - Use critical reflection to evaluate own work and justify valid conclusions - conclusions have been arrived at through synthesis of ideas and have been justified
D2 - Take responsibility for managing and organising activities - substantial investigations have been planned, managed and organised during the process of data gathering and analysis for business accounts, ratio analysis and marginal costing.
D3 - demonstrate convergent/lateral/ creative thinking – innovation and creative thought have taken place in creating and proposing recommendations to address the research findings. Clear models and tools for business accounts, ratio analysis and marginal costing have been consulted for the recommendations.
Part A Be able to evaluate business Accounts (Learning Outcome 3)
  • Assess the source and structure of a Trial Balance. ( Workbook)

Now try drawing up a trial balance yourself from the following accounts as at 29th February

Cash Book
















































































Dr      Cr
 Disc.CashBank Disc.CashBank
 £££ £££
Feb 1 Balance b/d  2191Feb 8 Sparrow  1559
Feb 3 Eagle  96Lark137 1233
Owl  200Feb 14 Wages  1125
Feb 15 Sales  1643Feb 23 Drawings  500
Feb 29 Balance c/d  507Feb 29 Shop Expenses  220
   4637 137 4367
    Mar 1 Balance b/d  507
General Ledger accounts

Capital Accounts












Dr  Cr
 £ £
  Feb 1 Balance b/d7320
Drawings Accounts












Dr  Cr
 £ £
Feb 23 Bank500  
Fixtures and Fittings (At costs) accounts
























Dr  Cr
 £ £
Feb 15000Feb 28 Balance c/d5540
Feb 3 Vulture540  
 5540 5540
Mar 1 Balance b/d5540  
Provision for depreciation account












Dr  Cr
 £ £
  Feb 28 Balance b/d1200
Stock account












Dr  Cr
 £ £
Feb 1 Balance b/d2726  
Purchases Account












Dr  Cr
 £ £
Feb 28 Sundry creditors account1037  
Sales Account
























Dr  Cr
 £ £
Feb 28 Balance c/d5078Feb 15 Bank1643
  Feb 28 Sundry creditors account3435
 5078 5078
  Mar Balance b/d5078
Wages Account












Dr  Cr
 £ £
Feb 14 Bank1125  
Shop Expenses Account












Dr  Cr
 £ £
Feb 29 Bank220  
Discount Received Account












Dr  Cr
 £ £
  Feb 28 Bank137
Bad Debts Account












Dr  Cr
 £ £
Feb 29 Owl437  
Creditors Ledger

Wren












Dr  Cr
 £ £
  Feb 1 Balance b/d825
Sparrow












Dr  Cr
 £ £
Feb 8 Bank1559Feb 1 Balance b/d1559
Lark




























Dr  Cr
 £ £
Feb 8 Bank1233Feb 1 Balance b/d1370
Feb 8 Discount received137Feb 6 Purchases475
Balance c/d475  
 1845 1845
  Mar 1 Balance b/d475
Vulture












Dr  Cr
 £ £
  Feb 2 Fixtures and Fittings540
Robin












Dr  Cr
 £ £
  Feb 6 Purchases562
Debtors ledger

Eagle
























Dr  Cr
 £ £
Feb 1 Balance b/d96Feb 3 Bank96
Feb 21 Sales1200Feb 28 Balance c/d1200
 1296 1296
Mar 1 Balance b/d1200  
Hawk
























Dr  Cr
 £ £
Feb 1 Balance b/d1624Feb 28 Balance c/d3859
Feb 28 Sales2235  
 3859 3859
Mar 1 Balance b/d3859  
Owl




















Dr  Cr
 £ £
Feb 1 Balance b/d637Feb 3 Bank200
  Feb 29 Bad Debts437
 637 637

  • A ) Evaluate business accounts, adjustments and notes (Workbook)

2 B) What is the purpose of disclosure notes to accounts? Explain with relevant examples (Informal Report)

3) Discuss the process and purpose of budgetary control. (Informal Report)
  • The Manager of the Iroj Hotel has prepared a budget in advance of the month ended 31 January 2015 ( Informal Report)

































 Budget

£10 800

 
Actual

£12 420
Variance
 

Sales

 
 

1 080 000
 

1 179 900
 
Variable Costs:   
Direct Labour     75 600

 
      84 456 
Room Amenities

 
       5 400        5 216 
Contribution

 
  999 0001 090 228 
Fixed Cost

 
  235 000   241 000 
Operating Profit  764 000   849 228 
What do the variances between the actual and budgeted mean and what would you suggest to the management with regards to them.

Part B: Be able to analyse business performance by the application of Ratios (Learning Outcome 4)

5A) Using the financial information below from Cindy’s Chicken Shop calculate the ratios( Workbook)
























































































































































































    Figures from profit and loss account 2014 2013 Change  
  £ £ in year 
        
     Sales     9,934.3       9,740.3 1.99% 
        
     Cost of sales     6,179.1       6,015.6 2.72% 
        
     Gross profit     3,755.2       3,724.7 0.82% 
        
    Net profit        746.5          836.9 -10.80% 
        
   Figures from balance sheet 2014 2013   
  £ £   
   Current assets total     1,460.1       1,641.7 -11.06% 
        
   Current liabilities total     2,005.4       2,210.2 -9.27% 
        
   Stock        681.9          685.3 -0.50% 
        
   Trade debtors        114.6            98.3 16.58% 
        
Capital employed  (invested)     4,738.3       4,597.6 3.06% 
        

 














































































    

 
 
     
     
     
Profitability RatioFormula20142013
     
     
Gross profit %    
     
     
     
Return on a capital    
employed %    
     
     
 

Net Profit %
   

 


































 Liquidity RatioFormula20142013
     
     
Current ratio    
     
 

Acid test ratio
   
      
5B) Fill in the table (Informal Report)






























RatioWhat it tell usGoodBadRecommendations
 

Gross profit

 

 
 

 

 

 

 

 

 

 

 

 
   
 

ROCE

 

 

 
 

 

 

 

 

 

 

 

 

 
   
 

Net Profit

 

 

 
 

 

 

 

 

 

 

 

 

 
   
 

 

Current Ratio

 

 

 
 

 

 

 

 

 

 

 

 

 
   
 

Acid Test Ratio

 

 

 

 
 

 

 

 

 

 

 

 

 

 

 
   

 

 

 

 

Part C – Be able to apply the concept of marginal costing (Learning Outcome 5)

6a) Listed below are some of the costs incurred by Pumins Pizza Restaurant, categorise them into Fixed, Variable & Semi Variable Costs.( Workbook)

























1Food ingredients
2Rent  
3Rates  
4Gas for cookers 
5Boxes for take-away pizzas
6Telephone bill 
7Managers wages 
8Part-time staff wages
9Mortgage payment
Finance in hospitality industry Assignment Help









































































































































































































6b)  Pumins pizza has worked out the cost of making one Vegetarian
pizza and one Meat feat pizza ( Informal Report)    
    VegetarianMeat feast 
    £ £
       
Direct materials            5.00         10.00
Direct labour             2.00           8.00
Fixed overheads            3.00           3.00
        
Pumins pizzas were approached by two businesses both would like Angelo
to cater an office party. Company A wants 500 vegetarian pizzas and will
pay £7,000. Company B wants 200 Meat feast pizzas and will pay £3,000
Should Pumin accept the orders

Calculate the contribution margin and explain why  do you think he should or shouldn’t accept the order, include in your answer to the relationship between cost/profit and volume.
   
        
 

 
     
        
        
        
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
      
       

 
 
        
       

 
 
        
Contribution calculations - Pumins pizza  
        
    VegetarianMeat feast 
    £ £ 
 Selling price     
LessVariable costs     
        
 Contribution     
          

 

 























6c) Break-even analysis ( Workbook)    
         
The rooms division manager of Sumit Palace hotel is due to meet with the marketing
director to discuss next year's promotion activities. The rooms manager is concerned with a recent drop in occupancy, and prior to meeting the director would like to find out the occupancy to reach break-even
      
She knows the following information:

 

Annual Fixed costs are £2,190,000

The hotel has 200 rooms

Average room rate is £67

Variable cost per room is £7

 

Calculate:

 

1)      The break even number of rooms

2)      The break even occupancy % and

3)    List 3 ways in which the Rooms Manager can reduce the break even level of room sales
Get Assignment Help with hndassignmenthelp@gmail.com

Check Next Post on finance in hospitality industry

Comments