SOLUTION MANUAL FOR Accounting Essentials for Hospitality Managers 3rd Edition by Chris Guilding 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 JL JL JL




Solutions – JL




Accounting Essentials for Hospitality Managers (3rd editi
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on)

CHAPTER 1 JL




Introduction
Problem 1.1: Solution JL JL




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 t
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hat is dominated by a casino, the success of the rooms and food and beverage departmen
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ts will be affected by the success of the casino operations in attracting clients to the com
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plex.

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 JL JL




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


2. seasonal sales volatility, JL JL


3. weekly sales volatility, JL JL


4. intra-day sales volatility. JL JL




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


1. Economic cycle induced volatility: Hotel sales’ high susceptibility to general econom
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ic conditions highlights the importance of hotels carefully forecasting economic cycle
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s 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 th
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at cost and revenue data should be recorded in a manner that will enable a well i
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nformed financial analysis of the pros and cons of closing.
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• Seasonal sales volatility can also pose particular cash management issues. During
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the middle and tail-L JL JL JL


end of the busy seasons, surplus cash balances are likely to result, while in the of
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f-
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,season and the build up to the busy season, deficit cash balances are likely to res
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ult. Careful cash budgeting will therefore need to be conducted.
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Seasonal sales volatility will also affect price discounting decisions. To ensure su
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ch decisions are well informed, careful forecasting as part of the annual budgetar
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y process, will have to be conducted.
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3. Weekly sales volatility: Accurate forecasting of weekly sales volatility will inform ma
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nagement’s decision making with respect to the amount and timing of room rate disco
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unting, 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 JL JL




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. JL JL JL JL JL JL JL


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


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 J L J L J L J L J L J L J L J L J L


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. JL JL JL JL JL JL JL JL JL JL JL JL


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


season. J L


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




Problem 1.4: Solution JL JL




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
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deterioration. Room nights and conference facilities cannot be placed in inventory becaus
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e they 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 p
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art of the budgeting process. Generally, the most important aspect of forecasting is room
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occupancy, as room sales drive sales levels of other hotel services. Accurate restaurant fo
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recasting provides the basis for maintaining a full menu of options while also minimising
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the cost of food wastage.
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Problem 1.5: Solution JL JL




Fixed costs are costs that do not vary as a function of sales activity levels. Hotels involv
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e considerable investment in fixed assets such as buildings on prime land as well as exte
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nsive furnishings, fittings and equipment. This investment generates high rent and deprec
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iation costs, which together with significant salary costs, result in a high fixed cost struct
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ure for hotels.
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Problem 1.6: Solution JL JL




a) Major hotel activities include room housekeeping, restaurant food preparation and ser
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vice as well as bar service. Despite the advent of the machine and computer age, the phy
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sical aspect of all of these activities has changed little over the last fifty years, as they co
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ntinue to have a high labour component.
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b) High labour intensive activities in hotels signifies the importance of performance mea
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sures that focus on labour productivity. Such performance indices include restaurant cove
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rs per employee hour worked and restaurant sales per employee hour worked. Monitoring
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differences between actual labour cost and budgeted labour cost represents another dime
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nsion of labour cost management. An appropriate analysis of the difference between bud
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geted and actual labour cost enables a distinction to be drawn between labour rate and la
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bour efficiency factors.
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Problem 1.7: Solution JL JL




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




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


g information in planning and controlling business activities.
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