One of the fastest growing sectors is travel and tourism as it covers all series and the services which are being given by the various tour operators they aim out to provide the high level of satisfaction which is given to their customers. It helps out to maintain the funds and the various resources that are being given to the tourist as in order to maintain more growth in this sector. Kindly do answer all the learning outcomes.
- Explain the importance of costs with the volume and the profit for all the management decision.
- Explain use of management accounting and the information which is used as decision making tool in all travel and tourism.
- Interpret the financial account business in travel and tourism.
- How distribution of funding in all public and the non-public tourism takes place.
An organization is compromised of multiple set of activities or actions in which several functions are carried out to attain set target and objectives. Travel and tourism sector is one of the fastest growing sector which covers series of services offered by different tour operator with an aim of providing high level of satisfaction to its customers. Finance is the primary necessity of every company that assist in performing routinely business practices and operation. Different sources are available that help in acquiring adequate level ammountof finance for both long and short term requirements. The main objective of this report is to acquire knowledge, techniques and skills that will help with process of decision making. It also looks at the importance of volume, cost and profit in travel and tourism sector along with different pricing strategies and cost methods. Along with this, it covers various sources and distribution of funding in travel and tourism industry and gain skills to explicate financial accounts.
P1.1 Significance of cost and volume in financial management of travel and tourism
Financial Management: It is associated with planning and deployment of funds in the business functioning of Carnival Corporation & Plc. It is observed that travel & tour business is consist of several cost and expenses which needs to be incurred for the development of tour packages for target customers at large. Firm operating in travel and tourism industry have to consider cost, profit margin and business volume in order to formulate effective strategies to stand in market for longer run and enlarge its business all across the globe.
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1. Cost: It is considered as a vital part in tour and travel business as it help in identifying total price of the packages. It can be define as the sum total of several expenses incurred while performing business functions and operations (Wong, Mistilis and Dwyer, 2011). For running business successfully, it is essential to maintain the cost of respective goods and services in an effective manner. Different types of cost used by Carnival Corporation & Plc are discussed below:-
- Direct cost: It is directly related with all expenses that incurred while offering various services to customers. These costs are related directly with the unit.
- Indirect cost: It include expenditure incurred on other associated activities such as hiring professionals, property rents, advertising, developing portals, printing brochures or pamphlets etc. These are indirectly related with business and also termed as overheads.
- Fixed cost: This cost is fix in nature and assist Carnival Corporation & Plc in decreasing total costs of travel and tour packages. It is usually comprised of contract payment to suppliers or vendors, lighting expenses, depreciation and further more (Pike, 2012).
- Variable cost: This is the cost which is variable in nature and changes with any variation that takes place in the number of customers in Carnival Corporation & Plc such as hiring cabs, expenditure of destination, recruiting new employee, accommodation services, transportation charges etc.
- Allocation: It occurs when indirect costs are allocated to cost objects. Basically it is a kind of expense that is related with and so can be readily allotted to definite business project, process or department. For example: sales costs, project management costs etc.
- Apportionment: It is another accounting method for attributing cost to particular cost objects. It refers to the procedure of sharing team's expenditure among individual funding programme being enforced.
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2. Volume: Carnival Corporation & Plc has been offering its services all across the world. There are several tools and techniques, used by business firms to calculate the ideal volume of travel and tour package that yield high amount of profits like break even points, economic order quantity etc.
- Break-even analysis: It is mainly utilized for the purpose of identifying a point where total cost is equal to total profit of the company (Evans, Stonehouse and Campbell, 2012).
- Economies of scale: These are the cost advantages that mainly obtain by scale of operation or output produced. It means when more units of services areproduced deliveredand that too on larger scale, economies of scale are achieved. With every increase in production unit, firm will have a better chance to reduce its overall costs.
- Diseconomies of scale: These are the cost disadvantages that government and firms accrue because of increase in company's output or size that ultimately leads to increase the production of products & services at increased per unit cost.