BIZ201 – Accounting for Decision Making – Accounting Assignment Help

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Assignemnt Task :

Learning Outcomes

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

b) Apply relevant accounting concepts to simple business scenarios

c) Apply basic costing and budgeting techniquesto business decision making

d) Apply capital budgeting techniques to capital investment scenarios

 

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 $65,000 for the life of the equipment.

Regarding the buying of the equipment, the useful life is predicted to be 3 years after which replacement is needed. At the end of its useful life, it is expected to be sold for the residual value of 25% of its original cost. A servicing contract will be drawn up with a company to take care of the equipment. Servicing will add 5% to the cost each equipment. This is to be paid separately as one lump sum at the beginning of the term and will last 3 years.

For the renting option, choose the one that is the most beneficial for the business. The rent is expected to rise by 12% each year. The rent is paid at the beginning of each period.

Servicing of the equipment is included in the rent.

 

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. Take into account the time value of money at the discount rate of 5%. Include advantages and

Option 1 – Sales and Marketing Department

 

 

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 $60,000 and subsequent cost of continuous promotion would be $2000 per month. Based on his calculations he believes offering the membership to the external clients would generate total revenue of $151,000 in the first year increasing by 10% every year after that.

The in-house trainer is expected to cost the hotel $5500 per month and the services of dietician additional $1500 per month and both are expected to increase by 3% 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 6%. 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 (inclusive of GST). The opening luncheon is budgeted to cost $25,000

Your team has been appointed to plan additional promotional activities for the remaining $10,000 (inclusive of GST). 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.

 

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.

 

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