The organisation in travel and tourism business has to consider various aspects related to funding and management of the accounting information. tasks to be accomplished includes the following:
- Develop an understanding for the importance of costs, volume and profit for decision making of management
- Identify the use of management accounting information for decision making
- Interpretation of financial accounts to assist decision-making
- Determination of sources and distribution of funding
Tourism is refers as travelling for the purpose of business activities and pleasure. There is significant role is played by this industry in the overall development of country. It is one of the industry which is growing with effective rate and provides large number of employment opportunities for the development of society. There are many tourist organisations are established with the aim of development of various tourist destinations with unique features for attraction of large number of visitors. In this regard they need to adopt effective pricing methods which helps to influence the behaviour of tourists which contributes in improvement of their profits. ATC is a tour operator organisation which plans summer holiday trip to Maldives Holiday Beach (Armenski, Dwyer and Pavluković, 2018).
In the present report explain about concept of CVP analysis and its contribution in financial management, Evaluation of the different pricing methods, different types of management accounting information used in ATC and application of investment appraisal techniques in improvement of decision making. Also, presentation of financial statements of organisation and different internal and external sources which helps to raise funds.
1.1 Concept of CVP analysis and its importance in financial management of ATC
ATC is tour operating organisation which plans trips for their tourists. The management of company decided about summer holiday trip to a Maldives Holiday Beach. For the comfort of their tourists they will hire cruise and beach chalets for their accommodation. It is observed that large number of cost is incurred for arranging these facilities which has direct impact upon their profitability.
CVP analysis is important concept which helps to determine that if change is happen in their cost and volume then at what amount is affects the operating income of organisation. For such kid of evaluation there is need to take various aspects on assumption basis like sales price, variable cost and fixed cost. This will provides the opportunity to the management of organisation effectively management their financial resources to attain higher number of benefits. This will provides insight to the manager of organisation about impact and interrelationship amount factors and their impact upon profits. The CVP refers to as cost, volume and profit analysis. The different aspects under this are defined below:
Direct cost: This includes such costs which are directly related to the production and delivering of specific goods and services. There are many costs which are incurred but not possible to assign directly are considered as indirect cost (Buckley, 2018).
Indirect cost: All the costs which are incurred by organisation in the process of production of goods and delivering of services but not directly related to specific product and service. These are further are segmented into two types fixed and variable. The costs which are considered under this includes administration, personnel and security costs.
Fixed cost: This refers to as such cost which is fixed all the time during the process of production and delivering of goods and services. It never changes with the change in production. This will occurs on purchase of fixed asset.