Business decision making for the hospitality industry

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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