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 a) Explain and evaluate the role and importance of financial information in business decision-making 

 

b) Apply relevant accounting concepts to simple business scenarios d) Apply basic costing and budgeting techniques to business decision making e) Apply capital budgeting techniques to capital investment scenarios Submission By 11:55 pm AEST/AEDT Thursday of Module 6 (Week Context

: This assessment is aimed at consolidating knowledge from Modules 1-6. By prescribing this assessment, you can reflect on your understanding of the importance financial information in business decision making and be able to apply costing and capital budgeting techniques to business scenarios like given in this case study. Instructions:

 1. Submit two files; Excel Workbook and the Business Report. This Excel Workbook is available on Blackboard under assessment section. Download it, perform calculations on it and submit it

. 2. Include a reference list to any textbooks, websites or other resources used to prepare the answers including references to suppliers that the costing was based on.

 3. For every task, show all workings through appropriate Excel formulas. Copy pasted numbers without appropriate Excel formulas will not be accepted

. 4. Unless otherwise instructed, round your numerical answers to two decimal places

. 5. Submit your assessment files using the following naming convention

 

 

 

 

Crystal Hotel Pty Ltd introduced in Part A of the Case Study has a quite flat organizational structure as per the chart below. The General Manager oversees each departmental manager directly. You have been offered an internship opportunity as a group to show your skills and how you could be of benefit to the organization. At the end of the internship, there may be an employment opportunity for the members of the group. You need to choose as a group whether you would like to take on your internship in the Sales and Marketing Department or Functions and Events Department. Based on your choice, complete the section of the assessment related to the department you have selected. Crystal Hotel Case Study General Manager Executive Assistant Manager Rooms Division Human Resources Accounting Sales and Marketing Functions and Events Food &Beverage BIZ201_Assessment 4 Brief_M6_Case Study Page 3 of 19 As per information provided in part A of the case study, the owners of the Crystal Hotel are planning to renovate and refurbish the hotel. A part of the redevelopment plan is to build a Wellness Centre on the rooftop of the hotel. The Sales and Marketing Manager volunteered to help with this project. He is a strong believer that it would bring the hotel up to the next level and that it would attract additional customers to the hotel. Due to the location of the hotel being within a proximity to the business district of Parramatta, he believes that the Wellness Centre should be opened to external clients as well. He suggests employing a full time, in-house trainer and a part-time dietician. He believes selling monthly membership including training sessions and dietary advice will attract additional clients who may then promote the hotel to their employers for accommodation and other business-related services. The marketing manager wants to be well prepared to support the Wellness Centre project and needs help with few tasks from your team.

  TASK 1 As part of the Wellness Centre Project, the plan is to build a small gym on the rooftop of the hotel. You have been appointed to help the Sales and Marketing manager to make decision whether to rent or buy specific equipment items. The required items are included in Appendix 1 together with costing information. The budget for the required equipment is $45,550 for the life of the equipment. The useful life of the equipment is predicted to be 3 years after which it will need to be replaced. At the end of its useful life, it is expected to be sold for the residual value of 6% of its original cost. From the renting options, choose the one that is the most beneficial for the business. The rent is expected to rise by 4% each year. The rent is paid at the beginning of each period. Servicing of the equipment is included in the rent. Assume that servicing its own equipment will cost the hotel additional $600 every year over the period of its useful life. Assume that servicing is done and paid at the end of each year. REQUIRED The manager would like to know whether it would be better for the Hotel to buy the required equipment or to rent it. Explore both options and make a recommendation. Consider the time value of money at the discount rate of 8%. Include advantages and disadvantages of each option and justify your choice

 

 

TASK 2 The Sales and Marketing Manager has an idea of creating monthly memberships for external visitors that he would like to explore further. He is thinking to create two types of membership options. A Basic Membership which would include access to the gym, sauna and pool and it would cost clients $40 a week. A Full Package Membership would additionally to the access include a one-hour weekly session with the in-house personal trainer and a dietician consultation once a month. Clients would pay $81 per week for this type of membership. He believes that an initial investment into promoting the centre would be $35,350 and subsequent cost of continuous promotion would be $808 per month. At the beginning he would like to make the service more exclusive and cap the membership to 20 basic membership clients and 30 full package membership clients. He wants to create a feeling of exclusivity amongst the clients. Based on his calculations he believes offering the membership to the external clients would generate total revenue of $138,000 in the first year increasing by 10% every year after that. The in-house trainer is expected to cost the hotel $5555 per month and the services of dietician additional $1515 per month and both are expected to increase by 4% each year. REQUIRED Calculate the net present value of the external membership project over the next 3 years period. Use yearly basis for your calculations. The estimated cost of capital for the hotel is 8%. Assume 30% company tax in Australia when determining the values of the after-tax net cash flow for each year. Based on your analysis would you recommend accepting the project and offer the membership to the external clients? Explain the basis for your recommendation. TASK 3 Once the Crystal Hotel Wellness Centre is ready for opening, it will need to be promoted to existing and potential new clients. There is already an opening event (luncheon) planned which is handled by the Functions and Events Department. The overall budget for promoting the opening of the centre is $35,000. The opening luncheon is budgeted to cost $20,200. Your team has been appointed to plan additional promotional activities for the remaining $14,800. The budget is aimed for the promotion of the opening of the centre only. Continuous promotional activities as well as online advertising will be handled separately. The marketing team has done initial research and the promotional activities to be considered are listed in the Appendix 3. Negotiated pricing has been included as well.

 

REQUIRED Calculate the net present value of the external membership project over the next 3 years period. Use yearly basis for your calculations. The estimated cost of capital for the hotel is 8%. Assume 30% company tax in Australia when determining the values of the after-tax net cash flow for each year. Based on your analysis would you recommend accepting the project and offer the membership to the external clients? Explain the basis for your recommendation

. TASK 3 Once the Crystal Hotel Wellness Centre is ready for opening, it will need to be promoted to existing and potential new clients. There is already an opening event (luncheon) planned which is handled by the Functions and Events Department. The overall budget for promoting the opening of the center is $35,000. The opening luncheon is budgeted to cost $20,200. Your team has been appointed to plan additional promotional activities for the remaining $14,800. The budget is aimed for the promotion of the opening of the center only. Continuous promotional activities as well as online advertising will be handled separately.

 The marketing team has done initial research and the promotional activities to be considered are listed in the Appendix 3. Negotiated pricing has been included as well. BIZ201_Assessment 4 Brief_M6_Case Study Page 5 of 19 REQUIRED Choose suitable promotional activities from the list provided to you and create a promotional budget for the Crystal Hotel Wellness Centre opening. Justify your choice of activities. TASK 4 Marketing team has suggested Crystal Hotel to run a promotion. They are charging $80 per person for one night’s accommodation including breakfast. The variable cost per person is $35 that includes food, cleaning and utilities. Fixed costs are $40,000 per year that include council rates rate, water rates and land taxes. REQUIRED They have asked for your expertise to carry out a CVP analysis for this promotion. Calculate the following: 

1. The contribution margin per service 

2. (a unit of service is one night’s accommodation for one guest). 2. The contribution margin ratio.

 3. The annual break-even point in number of services and in dollars of service revenue.

 4. The number of services required to earn a target net profit of $100,000 for the year (ignore income taxes). 

5. Analysis the importance of CVP analysis and comment on effectiveness of this promotion based on your calculations.

 

 

 

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