Reference no: EM132372762 , Length: word count : 2500

Assessment

Subject Learning Outcomes

a) Explain fundamental management accounting concepts and terms. Apply management accounting techniques that underpin cost management strategies in organisational contexts

b) Evaluate financial performance measurement processes, pricing and product mix decisions

c) Evaluate contemporary approaches to measuring and rewarding performance using financial and non-financial indicators and systems such as the balanced scorecard and benchmarking

d) Evaluate ethical issues in a management accounting context.

Purpose: This assessment is designed to assist students to combine the technical skills learned with the theoretical aspects of a number of management accounting concepts.

The assessment will allow students to demonstrate their ability to analyse the information provided for a given scenario and present their findings as they relate to the requirements of this assessment. As this is a team-based assessment, it will allow students to further develop their team-working and problem-solving skills.

Topic: Management accounting problem (case study).

Task details: Background:

Cool Destinations Ltd owns a chain of backpacker lodges located throughout Australia. The company’s profits have declined over the past year. In an attempt to isolate the causes of poor performance, the company has recently introduced a costing system to estimate the cost of its major services at each lodge. The company intends to use this information to review the service pricing structure and assess the profitability of its various service lines at each lodge.

Snowy Mountains Lodge is one of the busiest lodges in the Cool Destination chain. One of its main products is the provision of accommodation, which involves three main processes: reception, room maintenance and the collection of payments for accommodation. The lodge charges backpackers $40 per day for single bedrooms (double rooms are not available).

Another major product is the provision of evening meals, which involves a variety of ingredients and two major processes: kitchen service (cooking and clean-up) and table service. The price of the evening meals varies between $5 and $15, depending on the menu items selected.

A third product is the provision of a range of one-day and half-day tours. The lodge hires guides and provides equipment and transportation for a range of activities such as whitewater rafting, canyoning, canoeing and mountain trekking. Picnic lunches, purchased from the local bakery, are also provided for full-day tours. Tour prices vary considerably, depending on the activities included.

In the past year, the Snowy Mountains Lodge provided accommodation to 2 400 backpackers, who stayed an average of 5 nights each, purchased 8 000 evening meals, 300 one-day tours and 400 half-day tours. The following data relate to the Snowy Mountains Lodge for the past year.

Accommodation
Cost	Reception	Room maintenance	Collection of accommodation payments
Staff salaries	$50 000	$105 000	$60 000
Equipment depreciation and insurance	6 000	155 000	4 000
Electricity	3 000	5 000	2 500
Telephone	4 000	0	2 000
Building Lease*	1 200	30 000	900
Linen	0	4 800	0
Consumables	3 000	35 000	2 000

*Allocated per square metre

Evening Meals
Cost	Kitchen Service	Restaurant / table service
Staff salaries	$50 000	$30 000
Equipment depreciation and insurance	20 000	25 000
Electricity	15 000	4 000
Telephone	1 100	900
Building Lease*	1 900	4 100

*Allocated per square metre

Tours
Cost
Tour guides	$200 per day
Equipment depreciation	$20 000 per annum
Tour van depreciation	$5 000 per annum
Fuel and van maintenance	$10 000 per annum
Public liability insurance	$15 000 per annum
Picnic lunches	$12 per person per day
Other expenses	$6 000 per annum

Required:

1. Use process costing (show all workings) to estimate:

a. The cost per person of the accommodation process.

b. The cost per day of the room maintenance process. Occupied rooms are maintained (i.e. vacuumed and dusted) each day.

c. The cost per accommodation payment processed.

d. The total cost per person per day of accommodation, on average, assuming a five-day stay.

2. Assess the profitability of the accommodation service, per person per day and in total.

3. Assume that the same kitchen and restaurant processes are used for each customer. Use a hybrid costing approach to estimate the cost of the following evening meals:

Meal	Cost of ingredients
Roast	$4.20
Spaghetti bolognese	$3.30
Vegetarian burgers	$3.78
Fish fillets	$5.40

4. Given the information about the costs of the kitchen and restaurant processes, do you believe that the evening meal service is profitable? Explain your answer.

5. Describe the approach that you would take to estimate the cost of each tour.

6. Given the information about the costs of the tours, do you believe that the tour service is profitable? Explain your answer.

7. In light of recent innovations within the hospitality industry what recommendations would you make to the management of the Snowy Mountains Lodge to improve the profitability of its business? Link these recommendations to the quantitative analysis performed.

8. How might management of Cool Destinations Ltd use this information – what strategic considerations may be reviewed.

Task Details: Groups are to analyse the information provided, make appropriate calculations, develop recommendations and draw conclusions from their analysis. Submissions are to be in the form of a professional business report and include a title page, executive summary, table of contents, introduction, body, conclusion and reference list.

Style and Format:

1. Report should be typed on single sided pages, using Arial 11 font, double line spaced with 2.5 cm margins all around.

2. Reference and reference list – in text referencing should be in accordance with the Harvard Anglia method. The reference list should be prepared in accordance with the Harvard Anglia method and list only those references cited in the body of the report.