Assessment on Sales and Marketing Department
Accounting process is crucial for each business to make decision about the financial performance and reallocation of the resources of the company. the process offers investors and the other stakeholders of the business, a baseline of evaluation for comparing the financial health of the business with other companies to reach over a conclusion. It assists the relevant parties to measure the different financial level of the business so that they could make a better decision about the performance of the company.
In the report, various financial and accounting decisions has been made to offers a base to the financial manager of the company to make better decision about the performance of the company. In the report, main focuses has been done on the make or buy decision, Capital budgeting tools, budgeting and the cost volume profit analysis to measure that what changes could be done by the business to improve the overall performance of the business.
Assessment on Sales and marketing department:
The case explains that Crystal hotel pty ltd has built a small gym at the rooftop of the hotel and for that, the business requires some specific equipment, the sales and marketing manager has opted two options which explains that the business wither could buy the equipments or take it on rent. The buy or rent tool has been used to measure the total cost of the business is both the cases. Buy or rent decision tool evaluate the total associated cost with both the options and measure that which option would occur less cost to the company. the lesser the cost, the more preferable the option would be. The calculations or buy or rent is as follows:
|
BUY OPTION |
||||
|
|
COST |
Discounted Residual Value |
Servicing |
Total Cost over 3 years |
|
Treadmill (3 pieces) |
$18,171 |
$721 |
$600.00 |
$18,050 |
|
Elliptical Trainer (2 pieces) |
$8,078 |
$321 |
$600.00 |
$8,357 |
|
Exercise Bike (4 pieces) |
$13,328 |
$529 |
$600.00 |
$13,399 |
|
Rowing Machine (1 piece) |
$2,726 |
$108 |
$600.00 |
$3,218 |
|
TOTAL COST |
$42,303 |
$1,679 |
$2,400 |
$43,024 |
|
RENT OPTION |
|||
|
Discounted Value |
Discounted Value |
Discounted Value |
Total Cost over 3 years |
|
$1,824 |
$1,740 |
$1,659 |
$5,223 |
|
$935 |
$892 |
$851 |
$2,678 |
|
$837 |
$798 |
$761 |
$2,397 |
|
$776 |
$740 |
$706 |
$2,222 |
|
$4,372 |
$4,170 |
$2,318 |
$12,519 |
On the basis of the above tables, it has been measured that if the equipments would be bought by the business than the total incurred cost in three years would be $ 43,024. As well, if the equipment would be taken on rent than the total cost of the business would be $ 12,519. It explains that the rent cost of the company is quite lower than the buy option.
Further, if the buy option would be chosen by the company than the business could use the equipments on the basis of their terms, however, the changes could not be done frequently in the equipments. Similarly, if the rent option would be chosen by the company than the business could make the changes into the equipments easily but the various terms and conditions are always attached to the equipment (Koehler & Harvey, 2008).
On the basis of the overall evaluation, it has been measured that the rent option must be prefer by the business as the relevant cost is lower and the changes could be done by the business at any time without any further losses.
Further to the case, after setting up the gym, managers have decided to create two membership options for the guest. They have decided to charge different amount to the guest on the basis of the services. The sales and marketing manager has offered different cost and the charging amount to the guest on the basis of market study. The capital budgeting tool, NPV, has been applied on the company to measure the performance of the company.
|
Membership (Basic 39/month, Full Package 80/month) |
|||||||
|
Membership Project |
Cash Ouflow |
Cash Inflow |
Net Cash Flow |
Tax |
After Tax CF |
PV Factor |
NPV |
|
Year 0 |
$35,350 |
-$35,350 |
$0 |
-$35,350 |
1 |
– 35,350 |
|
|
Year 1 |
$808 |
$222,200 |
$221,392 |
$66,418 |
$154,974 |
0.9259 |
143,495 |
|
Year 2 |
$808 |
$238,481 |
$237,673 |
$71,302 |
$166,371 |
0.8573 |
142,637 |
|
Year 3 |
$808 |
$256,212 |
$255,404 |
$76,621 |
$178,783 |
0.7938 |
141,924 |
|
NPV |
|
|
|
|
|
|
$392,705 |
Make or Buy Decision
Through the above table, it has been measured that the total cost of the company is lower than the total cash inflow of the business. If the same amount would be charged than the present value of the future cash inflow of the business would be higher than the present value of cash outflow and it explains that the project is beneficial for the company and it would assist the business to generate more return.
Further, it has been evaluated that if the gym would be opened by the external guest of the hotel than it would offer more return to the company.
After starting the wellness centre, the business has decided to promote the centre among the new and existing clients. For this promotional event, a budget has been passed worth $ 35,350 out of which $ 15,150 has been passed for the additional activities of the event. Through the initial research, following budget has been prepared:
|
Promotional Budget |
|||||
|
Item |
Price(excl GST) |
GST |
Price (incl GST) |
Quanity Required |
Total Budgeted Value |
|
The Brisbane times (Quarter page strip) |
1132 |
$113.20 |
$1,245 |
2 |
$2,490 |
|
Digital foyer advertising (weekly rate) |
250.00 |
$25.00 |
$275 |
3 |
$825 |
|
Bus shelter poster (trail panel) |
$550 |
$55.00 |
$605 |
3 |
$1,815 |
|
Digital Billboard (medium) |
2500.00 |
$250.00 |
$2,750 |
1 |
$2,750 |
|
Printed Billboard |
$600 |
$60.00 |
$660 |
3 |
$1,980 |
|
Flyers |
$295 |
$29.50 |
$325 |
8 |
$2,596 |
|
Retail advertising |
$358 |
$35.80 |
$394 |
6 |
$2,363 |
|
TOTAL |
$5,685 |
$569 |
$6,254 |
26 |
$14,819 |
The overall budget explains that the cost of the extra activities of the promotional event would be $ 14,819. It is bit lesser than the actual budget of the company (Mintz & Morris, 2008). It explains that the above items must be purchased by the company in the above given quantity to manage the promotional event.
The marketing team has further advised to the company to run a promotion. In which, the guest would be accommodated for a night stay along with the breakfast. For this, the hotel could charge $ 80 per person and the cost of the business has been dividend into variable and fixed expenses to measure that whether the promotion should be implements and if yes, than how much person must be accommodated to cover all the expenses of the business.
|
CVP ANALYSIS |
|
|
CM |
$ 45.00 |
|
CMR |
56.25% |
|
Break-even (units) |
1,000 |
|
Break-even ($) |
$80,000.00 |
|
Number of units of service required to earn a target net profit of $ 100, 000 |
3222 |
Through the study, it has been measured that the contribution margin, CMR and annual BEP of the company is $ 45, 56.25% and 1000 units ($ 80,000) respectively. If the business wants to earn $ 1,00,000 from this activity than it is important to sell 3,222 units.
CVP analysis is crucial for the business to make decision about the minimum sell units to measure the kevel where the cost would be covered. Such as, through above calculations, it has been found that the CVP analysis makes it very easy for the business to make various decisions such as if 1000 people cannot be entertained by the business than the promotion must not be run (Garrison et al, 2010).
The case explains that Crystal hotel pty ltd has planned to introduce fresh plants in the lobby area, conference room and the function area, for that, the business requires some fresh plants, the manager has opted two options which explains that the business wither could buy the plants or take it on rent. The calculations or buy or rent is as follows:
|
BUY OPTION |
|||||
|
|
Cost |
Discounted Servicing |
Discounted Servicing |
Discounted Servicing |
Total Cost over 3 years |
|
Zamioculcas Zamiifolia (20 pieces) |
$800 |
$12,133 |
$11,235 |
$10,402 |
$34,570 |
|
Raphis Excelsa (10 pieces) |
$1,360 |
$1,360 |
|||
|
Howea Forsteriana (10 pieces) |
$570 |
$570 |
|||
|
Chamaedorea Elegans (30 pieces) |
$1,980 |
$1,980 |
|||
|
TOTAL |
$4,710 |
$12,133 |
$11,235 |
$10,402 |
$38,480 |
|
RENT OPTION |
|||
|
Discounted Value |
Discounted Value |
Discounted Value |
Total Cost over 3 years |
|
$1,407 |
$1,303 |
$1,207 |
$3,917 |
|
$2,546 |
$2,358 |
$2,183 |
$7,087 |
|
$1,843 |
$1,706 |
$1,580 |
$5,128 |
|
$5,607 |
$6,056 |
$5,192 |
$16,854 |
|
$11,403 |
$11,422 |
$10,161 |
$32,987 |
On the basis of the above tables, it has been measured that if the plants would be bought by the business than the total incurred cost in three years would be $ 38,480. As well, if the plants would be taken on rent than the total cost of the business would be $ 32,987. It explains that the rent cost of the company is quite lower than the buy option.
Capital Budgeting Analysis
Further, in the above task 1, it has been measured that both the options have their own pros and cons. It helps them to measure that which option is better (Nielsen, Mitchell & Nørreklit, 2015). On the basis of the overall evaluation, it has been measured that the rent option must be prefer by the business as the relevant cost is lower and the changes could be done by the business at any time without any further losses in the plants of the hotel.
Further to the case, the business has decided to invest into a software package which would help the business to manage the events. The software could be taken by the company either through a subscription package or could buy the permanent licence of the software. The capital budgeting tool, NPV, has been applied on the company to measure the total cost of the business on both the cases which are as follows:
|
|
Licence |
||
|
Membership |
Cash Ouflow |
PV Factor |
PV of Cash outflows |
|
Year 0 |
$6,900 |
1 |
$6,900 |
|
Year 1 |
$300 |
0.925925926 |
$278 |
|
Year 2 |
$309 |
0.85733882 |
$265 |
|
Year 3 |
$318 |
0.793832241 |
$253 |
|
TOTAL |
$7,827 |
$4 |
$7,695 |
|
|
Subscription |
||
|
Membership |
Cash Ouflow |
PV Factor |
PV of Cash outflows |
|
Year 0 |
1 |
$0 |
|
|
Year 1 |
$2,172 |
0.925925926 |
$2,011 |
|
Year 2 |
$2,237 |
0.85733882 |
$1,918 |
|
Year 3 |
$2,304 |
0.793832241 |
$1,829 |
|
TOTAL |
$6,713 |
$4 |
$5,758 |
Through the above table, it has been measured that the present value of total cash outflows of the business in context with the licence is $ 7,695 whereas if the subscription would be taken by the business than the total cost of the business would be $ 5,758. It explains that the subscription cash outflow of the business is lower than licence cost. Thus, the business is recommended to take the subscription of the software.
After starting the wellness centre, the business has decided to promote the centre among the new and existing clients. For this promotional event, a budget has been passed worth $ 35,350 out of which $ 20,500 has been passed for the main promotional activities of the event. Through the initial research, following budget has been prepared:
|
Venue Costing |
|||||
|
Item |
Price(excl GST) |
GST |
Price (incl GST) |
Quantity required |
Total Cost |
|
Chair cover hire |
$6 |
$0.60 |
$7 |
300 |
$1,980 |
|
Gift hampers |
$13 |
$1.30 |
$14 |
10 |
$143 |
|
Open entertainment |
$35 |
$3.50 |
$39 |
3 |
$116 |
|
Balloon Canterpieces |
$4 |
$0.35 |
$4 |
30 |
$116 |
|
Guest gifts |
$9 |
$0.90 |
$10 |
300 |
$2,970 |
|
Food |
$30.08 |
$3.01 |
$33 |
300 |
$9,926 |
|
Beverages |
$10 |
$1.00 |
$11 |
300 |
$3,300 |
|
AV system and staging |
$0.00 |
$0 |
$0 |
||
|
Event staff rate |
$22 |
$2.20 |
$24 |
$70 |
$1,694 |
|
$20,244 |
The overall budget explains that the cost of the extra activities of the promotional event would be $ 20,244. It is bit lesser than the actual budget of the company. It explains that the above items must be bought by the company in the above given amount to manage the promotional event (Schneeweiss, 2012).
The hotel has accepted a corporate meeting contract which would be placed at conference room of hotel. In which, the guest would be accommodated with a conference room and the catering services. For this, the hotel could charge $ 100 per person and the cost of the business has been dividend into variable and fixed expenses to measure that whether the promotion should be implements and if yes, than how much person must be accommodated to cover all the expenses of the business.
|
CVP ANALYSIS |
|
|
CM |
$ 60.00 |
|
CMR |
0.60 |
|
Break-even (units) |
167 |
|
Break-even ($) |
$16,666.67 |
|
Number of units of service required to earn a target net profit of $ 50, 000 |
1,000 |
Through the study, it has been measured that the contribution margin, CMR and annual BEP of the company is $ 60, 60% and 167 units ($ 16,667) respectively. If the business want to earn $ 50,000 from this activity than it is important to sell 1000 units.
CVP analysis is crucial for the business to make decision about the minimum sell units to measure the kevel where the cost would be covered (Libby, 2017). Such as, through above calculations, it has been found that the CVP analysis makes it very easy for the business to make various decisions such as if 167 people cannot be entertained by the business than the promotion must not be run (Ferrell & Fraedrich, 2015).
Conclusion:
On the basis of the both Assessment on Sales and marketing department and functions and department assessment, it has been found that the make or buy decision, Capital budgeting tools, budgeting and the cost volume profit analysis etc are very important for the business to measure that what changes could be done by the business to improve the overall performance of the business. these tools make it easier for the business to reach over a better conclusion in order to improve the profitability and other aspects of the business.
References:
Bonner, S. E. (2008). Judgment and decision making in accounting. Prentice Hall.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.
Garrison, R. H., Noreen, E. W., Brewer, P. C., & McGowan, A. (2010). Managerial accounting. Issues in Accounting Education, 25(4), 792-793.
Hilton, R. W., & Platt, D. E. (2013). Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.
Koehler, D. J., & Harvey, N. (2008). Blackwell handbook of judgment and decision making. John Wiley & Sons.
Libby, R. (2017). Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.
Mintz, S. M., & Morris, R. E. (2008). Ethical obligations and decision making in accounting: Text and cases. New York, NY: McGraw-Hill/Irwin.
Nielsen, L. B., Mitchell, F., & Nørreklit, H. (2015, March). Management accounting and decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39, No. 1, pp. 64-82). Elsevier.
Schneeweiss, C. (2012). Distributed decision making. Springer Science & Business Media.
Zimmerman, J. L., & Yahya-Zadeh, M. (2011). Accounting for decision making and control. Issues in Accounting Education, 26(1), 258-259.
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