Accounting Essentials for Hospitality Managers 3rd Edition Solutions Manual | Chris Guilding | All Chapters Solutions & Comprehensive Exam Prep 2026–2027

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, Accounting Essentials for Hospitality Managers, 3e Chris Guilding
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Solutions–AccountingEssentialsforHospitality l l l l l




Managers (3rd edition) l l l




CHAPTER 1 l




Introduction
Problem 1.1: Solution l l




a) Functional interdependency exists when the performance of one functional area is affected by l l l l l l l l l l l l




the performance of a separate functional area. For example, in a hotel complex that is dominated
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by a casino, the success of the rooms and food and beverage departments will be affected by the
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success of the casino operations in attracting clients to the complex.
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b) Functional interdependency is an important issue for the designers of a hotel’s system of l l l l l l l l l l l l l




accountability because care should be taken to hold a manager accountable for only those aspects
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of the hotel’s performance that he or she can influence. For example, the heads of rooms and food
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and beverage departments should not be held accountable for a decrease in their room sales if it is
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caused by reduced casino activity.
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Problem 1.2: Solution l l




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




2. seasonal sales volatility, l l




3. weekly sales volatility, l l




4. intra-day sales volatility. l l




b) The implications that these dimensions of sales volatility carry for hotel accounting systems
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are as follows:
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1. Economic cycle induced volatility: Hotel sales’ high susceptibility to general economic l l l l l l l l l l




conditions highlights the importance of hotels carefully forecasting economic cycles as part
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of the annual budgeting process.
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2. Seasonal sales volatility: Three accounting implications arise: l l l l l l




• Seasonal sales volatility can be so severe to warrant temporary closure for some resort l l l l l l l l l l l l l




properties. This possibility of having to make a closure decision signifies that cost and
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revenue data should be recorded in a manner that will enable a well informed financial
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analysis of the pros and cons of closing. l l l l l l l l




• Seasonal sales volatility can also pose particular cash management issues. During the l l l l l l l l l l l




middle and tail-end of the busy seasons, surplus cash balances are likely to result, while
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in the off-season and the build up to the busy season, deficit cash balances are likely to
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result. Careful cash budgeting will therefore need to be conducted.
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,Accounting Essentials for Hospitality Managers (C. Guilding)
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Seasonal sales volatility will also affect price discounting decisions. To ensure such
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decisions are well informed, careful forecasting as part of the annual budgetary process,
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will have to be conducted. l l l l l




3. Weekly sales volatility: Accurate forecasting of weekly sales volatility will inform
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management’s decision making with respect to the amount and timing of room rate
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discounting, 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-used pricing l l l l l l l l l l




strategies such as “early bird specials” in restaurants and “happy hours” in bars. Records
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concerning demand at different times of the day will have to be maintained in order to inform
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such hotel pricing issues.
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Problem 1.3: Solution l l




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. l l l l l l l l l l




(b) A shareholder deciding whether to sell her shares due to a fear that the company she
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has invested in might go bankrupt.
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(c) A potential shareholder thinking about purchasing shares in a company and l l l l l l l l l l




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. l l l l l l l




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




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




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. l l l l l l l l l l l l




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




season. l




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




Problem 1.4: Solution l l




a) High product perishability signifies that an item cannot be held in inventory for sale at a later
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time. Food items have a limited life in inventory because of their rapid physical deterioration.
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Room nights and conference facilities cannot be placed in inventory because they relate to a
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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 part of
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the budgeting process. Generally, the most important aspect of forecasting is room occupancy, as
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room sales drive sales levels of other hotel services. Accurate restaurant forecasting provides the
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basis for maintaining a full menu of options while also minimising the cost of food wastage.
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, Accounting Essentials for Hospitality Managers (C. Guilding)
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Problem 1.5: Solution l l




Fixed costs are costs that do not vary as a function of sales activity levels. Hotels involve
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considerable investment in fixed assets such as buildings on prime land as well as extensive
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furnishings, fittings and equipment. This investment generates high rent and depreciation costs,
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which together with significant salary costs, result in a high fixed cost structure for hotels.
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Problem 1.6: Solution l l




a) Major hotel activities include room housekeeping, restaurant food preparation and service as
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well as bar service. Despite the advent of the machine and computer age, the physical aspect of all
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of these activities has changed little over the last fifty years, as they continue to have a high labour
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component.
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b) High labour intensive activities in hotels signifies the importance of performance measures
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that focus on labour productivity. Such performance indices include restaurant covers per
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employee hour worked and restaurant sales per employee hour worked. Monitoring differences
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between actual labour cost and budgeted labour cost represents another dimension of labour cost
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management. An appropriate analysis of the difference between budgeted and actual labour cost
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enables a distinction to be drawn between labour rate and labour efficiency factors.
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Problem 1.7: Solution l l




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




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




information in planning and controlling business activities.
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