The scenario of this report is based on Akaglo Tours company which is travel sector organisation which is planning to construct a summer holiday trip. In this regard, firm wants to evaluate the requirement of finance and funding for their business context:
- Evaluate the significance of profit, volume and cost for the decision making of management in Akaglo Tours company.
- Determine the effectiveness of management accounting tool in the business decision making of Akaglo Tours company.
- Provide a clear interpretation for the financial accounts that can help in business decision making.
- Evaluate the sources of fund raising and distribution for public and non-public tourism development.
Finance is said to be lifeblood for any business, whether related to any industry they required valuable amount capital to finance their operations in appropriate manner. In accordance to travel and tourism sector, it seems to be primary concern which will leads to make plans for delivery superior services and travelling facilities to various tourists. According to the mentioned case about “Akaglo Tours company (ATC)” which is estimated for planning a summer trip to some attractive location of Maldives beach. This project report is all about determining importance of CVP analysis for decision making in tourism sectors. Analysis is to be done to make use of management accounting data as a decision making tools are discussed under this report. Interpretation of all financial ratios those are effective helpful in tourism sectors. Lastly, sources as well as distribution of funding for formulation of capital expenses are taken into consideration in more effective manner in this particular report (Stewart, 2017).
1.1: Importance of cost and volume in financial management of Tourism businesses
Tourism is primary aspects for any particular nation which is contributing maximum revenue from the visit of tourists. Nowadays, it seems to become more vital sectors that has made huge influences on increasing GDP as well as growth of nations economy. The primary motive of travel and tourism are wealth creating and generating maximum job opportunities during an accounting period. In some part of regions is taken as more valuable sources of welfare that can enhance standard of living. As per the mentioned scenario, ATC company is planning a summer trip in Maldives for one month. In respect to provide more reliable and comfort to the people they will be hiring a cruise and chalets. It has been determine that wide number funds can be going to invest in the arrangements of all these things. It will directly make impacts on the productivity and growth of the company (Baker and Corcoran, 2012). A well organise techniques would be used by the management to control their costs. Such as:
CVP analysis: It is known as one of the main aspects that is associated with examine all necessary changes which is related with organising trip are analyse in effective manner. It is consider as more reliable tools which shows relationship among volume, costs, prices and collected gains during the period. It seems to be internal parts of profit planning procedure of ATC. By using this, managers of the company would have plenty of option for an organisation to effectively control their financial resources in respect to attain maximum number of advantages in near future. It would deliver insight to managers of ATC regarding all impacts and relationship between factors and associated implications that relies upon revenues. In analysis cost and profit certain important aspects are needed to be taken into consideration. Such as:
Cost: It is consider as value of amount which is delivery by managements in order to retain something. It consists of various elements like:
Direct costs: These are said to be those costs which are directly livered on production or planning of any tours. There are numerous costs which would incurred but cannot be possible to control (Ciplet, Roberts and Khan, 2013).
Indirect cost: All those costs those are indirectly charged by the travel and tourism company for the delivery services to people. It is categories into two parts such as fixed and variable costs.
Fixed costs: It refers as those are costs which remain unchanged with the production of products and services during the period of trip journey. This will arises with the purchase of any accommodation facilities from tourist in Maldives. Examples, Rent and telephone charges.
Variable cost: It is said to be that costs which can be changes or alter with accommodation and services delivery in tourism and tour sectors.