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Running head: ACCOUNTING FOR DECISION MAKING

Accounting for Decision Making

Name of the Student:

Name of the University:

Author’s Note:

Course ID:
ACCOUNTING FOR DECISION MAKING 1

Table of Contents

Sales and Marketing Department Assessment: ............................................................................... 2

Task 2: ......................................................................................................................................... 2

Task 4: ......................................................................................................................................... 3

Functions and Event Department Assessment: ............................................................................... 5

Task 3: ......................................................................................................................................... 5

References: ...................................................................................................................................... 7
ACCOUNTING FOR DECISION MAKING 2

Sales and Marketing Department Assessment:

Task 2:

The above table depicts the viability of the external membership project, which is put

forward by the Sales and Marketing Manager of Crystal Hotel. The cash outflows associated

with this project include the promotional expenses as well as monthly payments that would be

incurred for the dietician and in-house trainer for their provided services to the hotel and it is

expected that they would experience an increase of 4% in payments every year. Along with this,

the first-year revenue is projected at $138,000, which would rise by 10% in the subsequent years.

From the above table, it could be seen that the net present value (NPV) is calculated as $6,183

and this is favourable for the hotel due to its positive value. As commented by Andon, Baxter

and Chua (2015), NPV helps in analysing the suitability of a project or investment by providing

an overview of the estimated profitability in future. For Crystal Hotel, the project is seen to have

positive value, which denotes that it is feasible for acceptance. This is because it would aid in

increasing the overall return on investment for the organisation (Collier, 2015).
ACCOUNTING FOR DECISION MAKING 3

Task 4:

With the help of CVP analysis, it is possible to ascertain the effect of alterations in

volume as well as cost on operating profit and net profit of any business organisation (Elmassri,

Harris & Carter, 2016). Moreover, the management conducts this analysis for making decisions

on price-setting in order to generate sufficient amount of profit in future. Thus, the accounting

professionals and business organisations are involved in using CVP analysis in order to make

informed decisions about the services provided or products sold (Kaplan & Atkinson, 2015). It is

noteworthy to state that the role of this analysis is critical in managerial accounting compared to

that in financial accounting. CVP analysis involves a number of assumptions before undertaking

final decisions and they are summarised as follows:

 It is easier to divide costs into variable and fixed costs from overhead, administrative and

manufacturing expenses.

 The selling price per unit remains unchanged.


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 The alterations in activities are the only factor having impact on cost.

 There is no difference between the volume of production and the volume of sales

(Nielsen, Mitchell & Nørreklit, 2015).

In case of Crystal Hotel, the role of CVP analysis is significant, as it is crucial to estimate the

level of sales in order to arrive at the break-even point for avoiding any kind of loss. This

analysis has assisted the management of Crystal Hotel in estimating revenue, which it is able to

generate in future. Moreover, the method is deemed to be valuable in the phase of hotel planning

in order to project the range of services that the management has to provide in order to fulfil the

break-even point of the business.


ACCOUNTING FOR DECISION MAKING 5

Functions and Event Department Assessment:

Task 3:

(Source: Melbourne.vic.gov.au, 2019)

From the provided information, it could be identified that in order to promote the Crystal

Wellness Centre, Crystal Hotel has planned to organise an event, in which it is estimated that

there would be approximately 300 guests attending the event. For conducting this event, the hotel

requires a number of resources. It needs chair cover of 300 pieces, which is expected to have a

cost of $4.40. The hotel would distribute 10 gift hampers to the guests, each of which is expected
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to cost $99.99. There would be three open entertainment shows, for which the hotel has to bear

the cost of $257.46. In addition, there would be 30 balloon counter pieces that would cost Crystal

Hotel nearly $84.55. Furthermore, the hotel would have to bear the expenses of gift hampers,

food and beverages for 300 guests. For gift hampers, food and beverages for 300 guests, the total

costs are estimated to be $3,197.70, $9.926.40 and $2,970.00 respectively.

It is already mentioned that AV system and staging would be provided internally and

hence, Crystal Hotel does not have to bear any expense for this particular resource. Finally, the

hotel has to bear event staff expenses of $1,694.00, since the event team would have 70

members. It has been mentioned that the overall budget of Crystal Hotel for this event is

$20,550. By combining all the relevant expenses, the same figure is arrived and therefore, the

hotel could undertake this event by keeping in mind the above-stated expenses and needed

resources, since rise in expenses would result in additional burden for the hotel, which might

minimise its overall return.


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References:

Andon, P., Baxter, J., & Chua, W. F. (2015). Accounting for stakeholders and making

accounting useful. Journal of Management Studies, 52(7), 986-1002.

Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for

decision making. John Wiley & Sons.

Elmassri, M. M., Harris, E. P., & Carter, D. B. (2016). Accounting for strategic investment

decision-making under extreme uncertainty. The British Accounting Review, 48(2), 151-

168.

Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.

Nielsen, L. B., Mitchell, F., & Nørreklit, H. (2015, March). Management accounting and

decision making: Two case studies of outsourcing. In Accounting Forum, 39(1), 66-82.

Melbourne.vic.gov.au. (2019). Retrieved 29 April 2018, from

https://www.melbourne.vic.gov.au/SiteCollectionDocuments/melbourne-event-planning-

guide.pdf

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