You have recently started work as a management accountant at Zilber Hotels, reporting to the financial controller. Draft management accounts have been prepared for the year just finished, and the financial controller has told you that one of your first jobs will be helping her to analyse the results in order to procluce the board report. However, she has warned you to expect a wide variety of iusks, because the year end is always a very busy time. The financial controller has given you some information to he|p you familiarise yourse\" with the company and the issues it is facing (Exhibits 1-3) and you have also collected some further information yourself (Exhibits 4 and 5): Exhibit 1: Company overview, prepared by the financial controller Exhibit 2: Summary management accounts Exhibit 3: Email from Chief Executive Officer (CEO), showing a potential strategic opportunity for the company Exhibit 4: Notes from meeting with the Head of Internal Audit Exhibit 5: Internal memo from the Head of Internal Audit Exhibit 1: Company overview Zilber Co operates a chain of 35 hotels across the country of Teeland. The hotels are all of a similar size, and on average each hotel has 90 rooms. The majority of Zilber's hotels are located in major cities, and the company's target market has primarily been business customers. In recent years, however, demand from business customers has started to decline, due to tough economic conditions. The company's policy is to set standard prices for the rooms in each hotel, with that price reflecting the hotel's location and toking account of competitors' prices. However, hotel managers have the authority to offer discounts selectively in order to obtain bookings - for example, by reducing the room rate for regular customers, or lowering prices at fimes when occupancy rates are expected to be low. Each hotel manager has the authority to offer a discount of up to 25% off the standard room rate. The average standard price per night (across all 35 hotels) was $150 in 20X7, compared to $145 in 20X6. All of Zilber's hotels are open 365 days per year. All the hotel rooms have the same facilities and specification, so that business customers staying in any Zilber hotel across the country will know in advance what to expect from their stay. Hotels in Teeland are rated on a 'star' system, with 5* hotels being the most luxurious. Zilber's hotels all have 4* ratings. In addition to room bookings, the hotels also generate revenue from additional activities, such as restaurants and bars. No discounts are offered on any of these additional revenue streams. At the end of their stay, all customers are invited to complete a short survey identifying the reasons they chose to stay in a Zilber hotel and how satisfied they were with their stay. Feedback from these surveys shows that the comfort of Zilber's rooms, the convenience of the hotels' locations, and the quality and efficiency of customer service are key factors in customers' choice of hotel. The quality of the guest's experience, and their level of satisfaction, influences not only the likelihood of them making repeat bookings but also the likelihood of them recommending Zilber Hotels to friends or co||eogues. As such, the board have identified customer satisfaction scores as a key performance indicator. Other key indicators the board monitor are occupancy rates (% of rooms occupied) and operating profit margin. Exhibit 2: Summary management accounts Year ended 30 June 20X7 Actual $'000 Revenue rooms at standard 131,072 price per night Room discounts or rate (24,904) reductions Other revenue (food, drink) 34,079 Total revenue 140,247 Operating costs (117,964) Operating profit 22,283 Other performance information 20X7 - Actual Operating profit % 15.9% Capital employed $52.1m Return on capital employed (*) 42.8% Occupancy rates 76% Customer safisfaction scores (**) 8.5 Notes Year ended 30 June 20X7 Budget $'000 129,347 (19,402) 33,630 143,575 (115,764) 27,811 20X7 - Budget Year ended 30 June 20X6 Actudl $'000 121,701 (18,255) 32,251 135,697 (111,965) 23,732 20X - Actual 17.5% $49.1m 48.3% 73% 8.9 *: Capital employed is calculated using the depreciated cost of non