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business
introduction to managerial accounting
Questions and Answers of
Introduction To Managerial Accounting
Using the data from the Peace Yoga Retreats example in this chapter, explain how relevant costing impacts on the decision-making process.
1 At the moment the kitchen of Tubby Tea Rooms makes its own cupcakes for use in the tea rooms and for sale to a number of events companies. This amounts to an average monthly production of 3,000
Explain the different cost bases available when using cost-plus pricing.
Explain the difference between ‘mark-up’ and ‘gross profit margin’ when pricing.
What is contribution margin pricing?
What is meant by ‘price discretion’?
How can target costing aid pricing?
The market will bear a price of £120 day delegate rate for conferences. The company wish to generate a 60% contribution towards fixed costs and profit.Use target costing to calculate the target
Explain the economist’s view of pricing.
Discuss the alternative market-based approaches to pricing and how they may be utilised.
Prepare a report for your manager that discusses the strengths and weaknesses of cost-plus versus contribution margin pricing.
Given the following data, using all the alternative cost-plus methods, calculate the mark-up percentage.Direct materials = £90,000 Direct labour = £500,000 Direct expenses = £25,000 Overhead
Define what is meant by the terms ‘yield management’ and ‘revenue management’.
On a specific flight there are 240 seats available, at a maximum price of £200 per seat. However only 180 seats are sold, with an average achieved ticket price of £110. Calculate the yield
Describe the characteristics required for revenue management to be of significant value.
Two customers stay in identical budget hotel rooms in the same hotel, on the same night; one has paid £29, whilst the other has paid £59. Using revenue management explain this situation.
Why might revenue management not be appropriate in retail product sales with a long ‘shelf-life’?
Define the two strategic drivers of revenue management.
Explain revenue management drivers in relation to Kimes and Chase’s four quadrants model.
Why does revenue maximisation not always lead to profit maximisation?
Within an environment with which you are familiar (hospitality, tourism or events) analyse how revenue management could be applied.
Discuss this statement. ‘Revenue management does not always lead to profit maximisation so should not be used’.
How can marketing and finance departments working together improve profitability?
Explain the difference between total absorption costing and activity-based costing.
What are the key elements of ABC?
How does activity-based management (ABB) build on ABC?
Explain the difference between a traditional hotel accounting approach and that used in CPA.
Describe the term ‘cost driver’ in relation to ABC. Give an example of a cost driver in events, hospitality and tourism.
How can CPA aid management decision making?
Explain the principles of profit sensitivity analysis and how it can aid managers.
a) In a sector with which you are familiar, (events, hospitality or tourism) consider the primary and secondary spend potential from an individual customer– list all products and services they
Using the data in Table 8.8, calculate the profit multipliers and review your answers by producing a full profit sensitivity analysis report.
Budgets have many uses; discuss the roles budgets can have in an organisation.
There are a number of limiting factors identify these and discuss them using illustrative examples related to hospitality, tourism or events.
Detail the components of the master budget and the individual budgets that will need to be prepared before the master budget can be completed.
Why is it important to have a detailed monthly cash budget? What financial issues might an organisation face without a cash budget?
Explain how a flexed budget could be used within a hospitality, tourism or events business with which you are familiar.
Explain what the advantages of responsibility accounting are and explain the various ‘responsibility centres’ that exist.
Explain the terms ‘beyond budgeting’ and ‘better budget’, how do these two concepts differ?
A music festival is offering a ‘ticket-plus’ package for £250. It includes a festival ticket, car parking, festival programme, and a souvenir tee shirt. Using the full prices below, how much
Write a report for the manager of either a hotel, conference centre, or a museum explaining how budgets can be utilised as a performance tool and their limitations.
Prepare a cash budget, income statement and a statement of financial position using the data in Table 9.10.
What makes an event unique in relation to the use of management accounting?
What is the purpose of having a detailed event budget?
Past experience shows for every event ticket sold, £24 is spent at the bar. If ticket sales are estimated at 6,000, what is the budgeted bar sales revenue?
Why is it important to monitor actual versus forecast data in the run up to an event?
Explain the relationship between Health and Safety guidance and event management accounting decisions.
What management accounting considerations should be made by managers whilst an event is taking place?
How can management accounting assist in the review of financial performance after an event?
How can past event information be utilised in planning future events?
An event is planned with budgeted ticket sales of 8,000 and is predicted to have sold 2,000 tickets (25%) 2 months before the event. However, 2 months before the event ticket sales are at 2,500.
Using information available online from their website (www.wychwood.com)consider how the management accounting considerations for events in this chapter could be applied to this specific event.
What are the four main techniques for analysing financial information?
When calculating index numbers, what is the ‘base year’ and why is its selection important?
What are the main benefits of common-sized statements and ratios?
Trade payables and trade receivables are also referred to as what?
Which two key ratios contribute to the return on capital employed (ROCE)?For each, explain what they reveal.
If asset utilisation was getting worse, which ratios would you calculate to try and explain the reasons.
What is the cash operating cycle and how is it calculated?
Which operational ratios are most commonly used in the hotel industry for external benchmarking?
a) Calculate the absolute difference and relative difference from this data. Sales Food Beverage Total Absolute Relative Year 1 Year 2 difference difference % 678,950 787,582 378,450 280,053
From the extracts of data provided below for Easy Events, calculate the ratios the following ratios and explain what they reveal.a) ROCEb) Asset utilisationc) Net profit percentaged) Gross profite)
What are the key elements of working capital?
Name the three working capital policies a business can follow.
How can overtrading be spotted?
What are the main items of stock of a hotel?
What are the main factors to consider before giving credit to a customer?
What is the purpose of a cash flow forecast?
You are part of the financial management team of an events firm called Allegro Ltd. As part of your job you have carried out a benchmarking exercise with other firms in the industry to evaluate your
a) Explain what is meant by ‘working capital cycle’ and its importance to managers.(5 marks)b) Given the data below, calculate the working capital requirements for next year compared to this
What are the advantages of using equity capital?
What are the main types of equity capital?
How do preference shares differ from ordinary shares?
What are the advantages of using debt finance?
Describe the features of bonds.
What method of financing are now most commonly used in hotels?
How can the size of operation impact on sources of finance available?
What does FDI stand for?
a) The owner of a successful privately-owned 60-bed hotel wishes to expand but requires more capital to do so.Identify and evaluate the potential methods the business could use to raise such capital
a) From the data shown below calculate the weighted average cost of capital. Source Ordinary shareholders Preference shareholders Lender 1 Lender 2 Amount (in 000) Cost/expected return % 15,000 5,000
Why is capital investment appraisal strategically important to an organisation?
Name four CIA methods that can be utilised.
What are the disadvantages of using a profit-based approach?
Explain how discounted cash flow (DCF) aids capital investment appraisal.
Which and how many methods would you recommend using prior to committing to a £1m development project?
The hotel has a maximum of £800,000 available for capital investmentNote: these figures are cash flows; depreciation is straight-line over 4 years.a) Calculate the payback period, accounting rate of
Using the data from question 6, calculate the IRR. How does this impact on your decision making?
As the management accountant, the manager has asked you to explain the merits of the following capital investment appraisal techniques and make recommendations for a capital investment process to be
The hotel can only fund one of these three projects Cash flows/year 0 1 2 31 41 Total 1 2 3 -6,000 -3,000 -3,000 500 1,700 0 600 1,850 0 3,500 500 0 3,500 650 4,800 2,100 1,700 1,800 Note: these
a) Calculate the payback period, accounting rate of return and the net present value (at 5%) for each of these proposals. (12 marks)b) From a financial perspective, recommend which project the hotel
What are the main weaknesses of traditional financial performance measures?
What do the terms ‘lead’ and ‘lag’ mean in the context of performance measures and why is this important?
What are the antecedents of the results and determinants model?
Explain the four dimensions of the Balanced Scorecard.
What is the major emphasis of the Performance Prism that differentiates it from the BSC?
Name two companies that provide benchmarking data to hotels.
Which performance management system is recognised as one of the most useful for hotels and how can it be used?
Why is it important to use both internal and external benchmarking data?
Identify the key priorities for a small events company which specialises in wedding planning and arrangement for each of the four dimensions of the Balanced Scorecard, identify suitable measures for
Your manager wants you to write a report detailing the internal and external benchmarks available and explaining why he should be using them in reviewing performance.
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