SOLUTION MANUAL FOR Accounting Essentials for Hospitality Managers 3rd Edition by Chris ISBN: 978-0415841092 COMPLETE GUIDE WITH RATIONALES 100% VERIFIED A+ GRADE ASSURED!!!!!!NEW LATEST UPDATE!!!!!

Solutions Manual For Accounting Essentials for Hospitality
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Managers, 3e Chris Guilding cx cx cx




Solutions – cx




Accounting Essentials for Hospitality Managers (3rd editio
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n)

CHAPTER 1 cx




Introduction
Problem 1.1: Solution cx cx




a) Functional interdependency exists when the performance of one functional area is affe
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cted by the performance of a separate functional area. For example, in a hotel complex th
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at is dominated by a casino, the success of the rooms and food and beverage departments
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will be affected by the success of the casino operations in attracting clients to the comple
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x.

b) Functional interdependency is an important issue for the designers of a hotel’s system
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of accountability because care should be taken to hold a manager accountable for only th
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ose aspects of the hotel’s performance that he or she can influence. For example, the hea
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ds of rooms and food and beverage departments should not be held accountable for a dec
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rease in their room sales if it is caused by reduced casino activity.
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Problem 1.2: Solution cx cx




a) The four main dimensions of sales volatility in the hotel industry are:
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1. economic cycle induced sales volatility, cx cx cx cx


2. seasonal sales volatility, cx cx


3. weekly sales volatility, cx cx


4. intra-day sales volatility. cx cx




b) The implications that these dimensions of sales volatility carry for hotel accounting sy
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stems are as follows: cx cx cx


1. Economic cycle induced volatility: Hotel sales’ high susceptibility to general economi
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c conditions highlights the importance of hotels carefully forecasting economic cycles
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as part of the annual budgeting process.
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2. Seasonal sales volatility: Three accounting implications arise:
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• Seasonal sales volatility can be so severe to warrant temporary closure for some r
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esort properties. This possibility of having to make a closure decision signifies tha
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t cost and revenue data should be recorded in a manner that will enable a well inf
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ormed financial analysis of the pros and cons of closing. cx cx cx cx cx cx cx cx cx


• Seasonal sales volatility can also pose particular cash management issues. During
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the middle and tail- cx cx cx


end of the busy seasons, surplus cash balances are likely to result, while in the off
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-
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,season and the build up to the busy season, deficit cash balances are likely to resu
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lt. Careful cash budgeting will therefore need to be conducted.
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•Seasonal sales volatility will also affect price discounting decisions. To ensure suc
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h decisions are well informed, careful forecasting as part of the annual budgetary
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process, will have to be conducted. cx cx cx cx cx


3. Weekly sales volatility: Accurate forecasting of weekly sales volatility will inform man
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agement’s decision making with respect to the amount and timing of room rate discou
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nting, staffing needs as well as restaurant purchasing needs.
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4. Intra-day sales volatility: Intra-day demand volatility has led to widely-
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used pricing strategies such as “early bird specials” in restaurants and “happy hours” i
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n bars. Records concerning demand at different times of the day will have to be maint
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ained in order to inform such hotel pricing issues.
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Problem 1.3: Solution cx cx




Examples of business decisions requiring the use of financial accounting data include:
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(a) A bank manager deciding whether to lend money to a company.
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(b) A shareholder deciding whether to sell her shares due to a fear that the compa
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ny she has invested in might go bankrupt.
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(c) A potential shareholder thinking about purchasing shares in a company
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and interested in determining if the company is profitable.
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Examples of business decisions requiring the use of management accounting data include:
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(a) Determining whether accounts are being collected on time. cx cx cx cx cx cx cx


(b) Determining whether the business will have sufficient cash over the next year cx cx cx cx cx cx cx cx cx cx cx cx


to avoid the need to arrange a line of credit.
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(c) Determining whether a drinks vending machine or a confectionary ven c x c x c x c x c x c x c x c x c x


ding machine should be installed in a hotel’s foyer area.
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(d) Determining what room rate to charge to achieve a target level of profit. cx cx cx cx cx cx cx cx cx cx cx cx


(e) Determining whether a seasonal hotel should be closed down during the quiet cx cx cx cx cx cx cx cx cx cx cx c


season. x


(f) Determining whether a restaurant manager is performing well. cx cx cx cx cx cx cx




Problem 1.4: Solution cx cx




a) High product perishability signifies that an item cannot be held in inventory for sale at
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a later time. Food items have a limited life in inventory because of their rapid physical de
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terioration. Room nights and conference facilities cannot be placed in inventory because t
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hey relate to a particular time period that expires.
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b) The absolute perishability of rooms, conference and banquet facilities and the relative
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perishability of food underlines the importance of accurate hotel demand forecasting as pa
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rt of the budgeting process. Generally, the most important aspect of forecasting is room o
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ccupancy, as room sales drive sales levels of other hotel services. Accurate restaurant fore
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casting provides the basis for maintaining a full menu of options while also minimising th
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e cost of food wastage.
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Problem 1.5: Solution cx cx




Fixed costs are costs that do not vary as a function of sales activity levels. Hotels involve
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xconsiderable investment in fixed assets such as buildings on prime land as well as extensi
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ve furnishings, fittings and equipment. This investment generates high rent and depreciati
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on costs, which together with significant salary costs, result in a high fixed cost structure
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for hotels.cx




Problem 1.6: Solution cx cx




a) Major hotel activities include room housekeeping, restaurant food preparation and serv
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ice as well as bar service. Despite the advent of the machine and computer age, the physi
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cal aspect of all of these activities has changed little over the last fifty years, as they conti
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nue to have a high labour component.
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b) High labour intensive activities in hotels signifies the importance of performance meas
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ures that focus on labour productivity. Such performance indices include restaurant covers
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per employee hour worked and restaurant sales per employee hour worked. Monitoring d
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ifferences between actual labour cost and budgeted labour cost represents another dimensi
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on of labour cost management. An appropriate analysis of the difference between budgete
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d and actual labour cost enables a distinction to be drawn between labour rate and labour
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efficiency factors. cx




Problem 1.7: Solution cx cx




Financial accounting concerns the preparation of financial reports for external users such
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as shareholders, banks and government authorities. In order for these financial reports to
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be meaningful, it is important that they are produced in a standardised way and are seen t
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o be reliable. Management accounting concerns the provision of financial information to
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internal management. This information is designed to help managers in their decision ma
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king and control of businesses. Financial information sought by hotel managers includes
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determining the cost of providing a meal to inform the menu pricing decision, determinin
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g how many delegates need to attend a conference in order to achieve break even, and det
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ermining what level of profit is made by each selling unit of a hotel to inform any rationa
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lisation decision to drop a unit. The provision of all these types of financial information f
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alls within the scope of management accounting.
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Problem 1.8: Solution cx cx




The main accounting information users are:
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• Managers within the company being accounted for. Managers use accountin cx cx cx cx cx cx cx cx cx


g information in planning and controlling business activities.
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