Business decision making for the hospitality industry

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Reference no: EM132428464 , Length: word count:3000

Business Decision Making for the Hospitality Industry - Berlin School of Business and Innovation

Assignment - Business Decision Making for the Hospitality Industry

Question 1:
Discuss the usefulness of the statement of profit and loss and statement of financial position when making a decision. Explain the information that the following ratios provide:
a) Gross, operating and earnings margins
b) Return on capital employed and return to equity
c) Acid Test
d) Financial gearing and interest cover

Question 2:
What are the costs of holding inventory? What is the economic order quantity and what would that number be given the information below?
• Annual demand             40,000 units
• Ordering costs              €178 per order
• Holding costs per unit    €1.25

Question 3:
Explain the concept of net present value, payback period and internal rate of return. Using the data below, provide calculations for these three items. Please present your data on a spreadsheet using formulas whenever possible.

Initial investment is €280,000 Project life is 5 years

Cost of capital is 8% Cash flows are as follows:

Year

Cashflows

0

-260,000

1

55,500

2

65,780

3

75,900

4

88,630

5

95,450

Should the project be invested in based upon the data above? What other factors should we consider when making an investment decision?

Question 4:
Discuss the usefulness of the concepts of break-even point and margin of safety to a business. Provide spreadsheet calculations for both breakeven point and margin of safety from the following data:

Planned level of activity is

140,000 units

Total planned sales revenue is €

€1,680,000

Direct material

€700,000

Direct labour

€2 per unit

Total fixed costs

€250,000

Question 5:
Discuss the role of budgeting within a business.

You have the following information available to you

 

10,000 units of production

20,000 units of production

Sales revenue

€325,000

€650,000

Direct materials

€50,000

€100,000

Direct labour

€30,000

€60,000

Production overhead *

€35,000

€55,000

Administration overhead

€80,000

€80,000

Profit

€130,000

€355,000

*Production overhead includes both fixed and variable cost elements

Prepare a budget for the planned level of production of 27,000 units.

Attachment:- Business Decision Making for the Hospitality Industry.rar

Reference no: EM132428464

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