please solve question b) only, tq
please solve question b) only, tq
please solve question b) only, tq
Alpha Cruise Lines Bhd is a global cruise company and one of the largest vacation companies in the Asian region. Their portfolios of leading cruise brands include Draconis Cruise and Leonis Cruises in Malaysia. These brands, which comprise the most recognized cruise brands in Asia, offer a wide range of holiday and vacation products to a customer that is broadly varied in terms of cultures, languages and leisure-time preferences. The company also owns a tour company Delta Tours that complements the cruise operations Malaysia. The company's main revenue is generated from passenger tickets, onboard services (including cabins and suites, wellness and spa, beverages packages, fine dining &specialty restaurants and honeymoon packages) and tours. The chief management accountant Zahrin is the person responsible for the management accounting part of the company. Most of the decision pertaining costs and pricing are determined through board meeting, after going scrupulous consideration at the management accounting department level. The board has made it clear that profit in business comes from repeat customers, customers that boast about the service and bring friends with them. Nevertheless, the board has also elucidated that the company is not merely profit oriented. The following are financial and non-financial information pertaining to the company's operation for the year 2021. The engine of Harmony, one of the company's ships that are currently being used for Langkawi - Dubai route is having some technical issues. The company is considering as to whether to repair or replace the existing engine with a new one. According to data prepared by management team, the existing engine has a carrying value of RM3 million (cost: RM15 million) and two years of remaining useful life, whilst the disposal value is zero. The repair cost is estimated at RM1.5 million. Should the repair take place, the useful life of the engine shall be extended to the total of 4 years. On the other hand, should the company decided to dispose-off the existing engine and buy a new one, another competitor agreed to buy at price of RM2.5 million. The annual variable operation cost incurred for the engine was RM200, 000. These include labour, fuel and maintenance. Another option is to replace with a new engine that has a shorter useful life but with lower cost. The new engine purchase price is RM8 million (10 years useful life, nil residual value) must undergo intensive maintenance every year which costs RM400,000. The variable operation cost incurred for the engine will be lessen by half from the old engine due to efficient use of fuel and less direct labour involvement. Aisara, one of the junior executives in the team is in the opinion that the company should replace the engine due to cost savings on depreciation charged for new engine and variable operation cost cut off. Her opinion however was refuted by Farhan, the senior member by saying that her judgment on the matter is unrefined. Farhan asked Aisara to perform thorough cost comparison between these two alteratives before presenting the matter to Zahrin, their boss. In the past two years, the wellness and spa onboard services for Draconis Cruise was not doing very well for all destinations. Although located in a strategic venue on the ships, the wellness and spa failed to arrest attention of the cruise passengers. Wellness and spa services will only be occupied if passengers bought the sumptuous exclusive package. As a result, most cruise passengers tend to exclude the wellness and spa services and part of their activities during the cruise. Zahrin is concerned about the profitability of the services and he need to advise the Board as to whether the wellness and spa services should be continued or closed down for Draconis Cruise. Zahrin asked Mia, one of the executives, to provide him a cost-benefits analysis pertaining to the matter. Mia has collected some relevant data about wellness and spa onboard services for all ships in operation under Draconis Cruise. The annual sales comprised of two main sources which are revenue from purchase of exclusive package of RM150,000 and walk in cruise passengers' revenue of RM50,000. The annual costs information is as follows: Cost items Massages cost (massage oils, antiseptic hand gel and aromatic oils scent) Massage therapists salary (5 persons, all started working 2 years ago) Note: The company has a legal arrangement with the massage therapists, in case of unexpected retrenchment within 5 years of employment the company will be liable to pay RM100,000 compensation to each person, together with the monthly salary for further 12 months after retrenchment. Skin care products (cleansing soaps and gels, skin astringents and facial scrubs) Nail products cost for manicures and pedicures (nail polish colors, extra nail brushes, remover, cotton balls and toe separators) Annual licenses Supervisor salary RM 10,500 120,000 20,000 10,000 5,000 30,000 Total costs 195,500 Apart from the cost items, Mia also gathered some information with marketing department relating to the option of closure of wellness and spa onboard service. According to the marketing manager, the company might lose contribution RM70,000 of passengers' tickets that would be attracted to the wellness and spa services to a competing cruise. Mia hadi some discussion with the team members about the possible alternative income after all premises for wellness and spa has been vacated. There are two options available, first they can allow the fine dining and specialty restaurants to have an open caf which will increase the revenue for the company amounting to RM210,000 or secondly, they can allow the onboard crews to use the premises as relaxation and rejuvenation place for no charges. Since business is about making money to Mia, she decided to ignore the second alternative in her evaluation. Zahrin is scheduled to meet up with the Board next week, he needs to be ready with all possible answers to the questions and inquiries about the two dilemmas that the company's facing. He needs to make sure any proposed decision will ensure profitability whilst considering the increasing awareness of business sustainability. Required: a) Prepare cost comparison report. Based on the results, advise Aisara on the proposed plan to replace Harmony's engine. (10 marks) b) Prepare cost benefit analysis for proposal to retain or close wellness and spa onboard services. Conclude and rationalise your findings. (8 marks) c) If the company's policy is to be a responsible corporate citizen towards achieving business sustainability, would Mia's analysis be different from what she proposed previously? (6 marks) d) Discuss strategic issues that might be taken into consideration in deciding whether or not to retain or close wellness and spa onboard services. (6 marks) Alpha Cruise Lines Bhd is a global cruise company and one of the largest vacation companies in the Asian region. Their portfolios of leading cruise brands include Draconis Cruise and Leonis Cruises in Malaysia. These brands, which comprise the most recognized cruise brands in Asia, offer a wide range of holiday and vacation products to a customer that is broadly varied in terms of cultures, languages and leisure-time preferences. The company also owns a tour company Delta Tours that complements the cruise operations Malaysia. The company's main revenue is generated from passenger tickets, onboard services (including cabins and suites, wellness and spa, beverages packages, fine dining &specialty restaurants and honeymoon packages) and tours. The chief management accountant Zahrin is the person responsible for the management accounting part of the company. Most of the decision pertaining costs and pricing are determined through board meeting, after going scrupulous consideration at the management accounting department level. The board has made it clear that profit in business comes from repeat customers, customers that boast about the service and bring friends with them. Nevertheless, the board has also elucidated that the company is not merely profit oriented. The following are financial and non-financial information pertaining to the company's operation for the year 2021. The engine of Harmony, one of the company's ships that are currently being used for Langkawi - Dubai route is having some technical issues. The company is considering as to whether to repair or replace the existing engine with a new one. According to data prepared by management team, the existing engine has a carrying value of RM3 million (cost: RM15 million) and two years of remaining useful life, whilst the disposal value is zero. The repair cost is estimated at RM1.5 million. Should the repair take place, the useful life of the engine shall be extended to the total of 4 years. On the other hand, should the company decided to dispose-off the existing engine and buy a new one, another competitor agreed to buy at price of RM2.5 million. The annual variable operation cost incurred for the engine was RM200, 000. These include labour, fuel and maintenance. Another option is to replace with a new engine that has a shorter useful life but with lower cost. The new engine purchase price is RM8 million (10 years useful life, nil residual value) must undergo intensive maintenance every year which costs RM400,000. The variable operation cost incurred for the engine will be lessen by half from the old engine due to efficient use of fuel and less direct labour involvement. Aisara, one of the junior executives in the team is in the opinion that the company should replace the engine due to cost savings on depreciation charged for new engine and variable operation cost cut off. Her opinion however was refuted by Farhan, the senior member by saying that her judgment on the matter is unrefined. Farhan asked Aisara to perform thorough cost comparison between these two alteratives before presenting the matter to Zahrin, their boss. In the past two years, the wellness and spa onboard services for Draconis Cruise was not doing very well for all destinations. Although located in a strategic venue on the ships, the wellness and spa failed to arrest attention of the cruise passengers. Wellness and spa services will only be occupied if passengers bought the sumptuous exclusive package. As a result, most cruise passengers tend to exclude the wellness and spa services and part of their activities during the cruise. Zahrin is concerned about the profitability of the services and he need to advise the Board as to whether the wellness and spa services should be continued or closed down for Draconis Cruise. Zahrin asked Mia, one of the executives, to provide him a cost-benefits analysis pertaining to the matter. Mia has collected some relevant data about wellness and spa onboard services for all ships in operation under Draconis Cruise. The annual sales comprised of two main sources which are revenue from purchase of exclusive package of RM150,000 and walk in cruise passengers' revenue of RM50,000. The annual costs information is as follows: Cost items Massages cost (massage oils, antiseptic hand gel and aromatic oils scent) Massage therapists salary (5 persons, all started working 2 years ago) Note: The company has a legal arrangement with the massage therapists, in case of unexpected retrenchment within 5 years of employment the company will be liable to pay RM100,000 compensation to each person, together with the monthly salary for further 12 months after retrenchment. Skin care products (cleansing soaps and gels, skin astringents and facial scrubs) Nail products cost for manicures and pedicures (nail polish colors, extra nail brushes, remover, cotton balls and toe separators) Annual licenses Supervisor salary RM 10,500 120,000 20,000 10,000 5,000 30,000 Total costs 195,500 Apart from the cost items, Mia also gathered some information with marketing department relating to the option of closure of wellness and spa onboard service. According to the marketing manager, the company might lose contribution RM70,000 of passengers' tickets that would be attracted to the wellness and spa services to a competing cruise. Mia hadi some discussion with the team members about the possible alternative income after all premises for wellness and spa has been vacated. There are two options available, first they can allow the fine dining and specialty restaurants to have an open caf which will increase the revenue for the company amounting to RM210,000 or secondly, they can allow the onboard crews to use the premises as relaxation and rejuvenation place for no charges. Since business is about making money to Mia, she decided to ignore the second alternative in her evaluation. Zahrin is scheduled to meet up with the Board next week, he needs to be ready with all possible answers to the questions and inquiries about the two dilemmas that the company's facing. He needs to make sure any proposed decision will ensure profitability whilst considering the increasing awareness of business sustainability. Required: a) Prepare cost comparison report. Based on the results, advise Aisara on the proposed plan to replace Harmony's engine. (10 marks) b) Prepare cost benefit analysis for proposal to retain or close wellness and spa onboard services. Conclude and rationalise your findings. (8 marks) c) If the company's policy is to be a responsible corporate citizen towards achieving business sustainability, would Mia's analysis be different from what she proposed previously? (6 marks) d) Discuss strategic issues that might be taken into consideration in deciding whether or not to retain or close wellness and spa onboard services. (6 marks)
