Individual Assignment

Programme Name: Higher Diploma in Tourism, Hospitality and Events

Management

Module Name: Managerial Accounting for Tourism, Hospitality and Events

Assignment Learning Objectives:

The learning objective of the assignment is test the student on the knowledge learnt in
managerial accounting in respect to Hospitality industry. This covers cost management,
budgeting, hotel performance indicators, sources of finance

A. The References should be done using the Harvard style.

B. Deadline for assignment will be on 13 July 2022 and it will be submitted via Safe Assign
on Blackboard.

Assessment Methods

This assignment contributes 40% to your overall assessment. Please refer to your module
descriptor for more details on presentation and report assessment rubrics.

1) Peggy Richards is considering purchasing the vacant lot adjacent to her current restaurant
location. Peggy is convinced that by purchasing and paving it to make a parking lot, the
additional NOI she would earn is $61,500 per year. The total project is estimated to cost
$250,000. Peggy can borrow money at 8% interest. If she finances the purchase with 100%
equity, she will earn a 24.6% return on her funds (if her projections are correct). Peggy
thinks she can do better. Help her calculate the various returns on her money she could
achieve with different debt/equity purchase strategies, and then answer the questions she
has about her project
a) What would be Peggy's rate of return on her own investment if she borrowed 50% of the
money required for the lot's purchase and paving? What would be her debt coverage ratio?
(5 marks)
b) What would be Peggy's rate of return on her own investment if she borrowed 60% of the
money required for the lot's purchase and paving? What would be her debt coverage ratio?
(5 marks)
c) What would be Peggy's rate of return on her own investment if she borrowed 70% of the
money required for the lot's purchase and paving? What would be her debt coverage ratio?
(5 marks)
d) What would be Peggy's rate of return on her own investment if she borrowed 80% of the
money required for the lot's purchase and paving? What would be her debt coverage ratio?
(5 marks)
e) List two potential disadvantages (to Peggy) of employing a highly leveraged strategy when
making this purchase. (10 marks)

Total: 30 Marks

2)
Joan owns a large party planning and catering company. Joan wants to budget her business's
cash usage for the months of July, August, and September (the third quarter of her fiscal year).
To do so, she reviews her sales forecast, accounts receivable balances, and operational
expense history which are as follow:-
She has budgeted her revenues, cost of sales, and operating expenses based on sales forecasts
for the months of July, August, and September.

She has interest expenses of $7200 per month.

She pays an insurance premium of $10,000 in the first month of every quarter.

She expects to collect 30% of revenues in the month they are generated (current month) and
the remaining 70% the next month as accounts receivable (AR) based on her aging of accounts
receivable. The arrows show the placement of current and next month revenues.

She expects to collect in July $95,550 from accounts receivable from June.

She expects to pay 60% of the cost of sales in the month they are incurred (current month)
and the remaining 40% the next month as accounts payable (AP). The arrows show the
placement of current and next month cost of sales.

She expects to pay 50% of her operating expenses in the month they are incurred (current
month) and the remaining 50% the next month as accounts payable (AP). The arrows show
the placement of current and next month operating expenses.

She expects to pay 100% of her non‐operating expenses in the month they are incurred.

She expects to pay in July $31,200 from accounts payable for cost of sales from June.

She expects to pay in July $45,500 from accounts payable for operating expenses from June.

Her beginning cash balance in July will be $10,000.

Ending cash balance for one month is the beginning cash balance of the next month.

a) Prepare a Cash Budget for the months from July to September

b) She requires a minimum cash balance of $3000 at all times (for emergencies).
Any shortages in cash will be covered with short‐term loans of $5000 with 10% interest.
Advise if she needs to take up the loan based on the cash budget prepared in (a) and what
should she do to keep the cashflow healthy.
Total 30 marks
3) What are the types of budgets available to help the managers in planning for the future of
the business.

Total 25 marks

4)
Jerielle Pelley is the front office manager at the 125‐room Best Stay Inn. Her general manager
has asked her to prepare a net ADR yield report for the hotel's prior month room sales. The
manager has asked Jerielle to address several specific issues in the summary she is to prepare.
Using the information provided below, help Jerielle calculate the answers she needs to
complete her report.

The reservation‐generation (sales) fees that must be paid by the hotel include the following:

Third‐party Internet sales fee per room $28.00

Franchisor‐Delivered sales fee per room $8.00

Travel agent sales fee per room $15.00

Based on those fees, calculate the net ADR yield percentages for the following distribution
channels and then answer the questions that follow:

Distribution Channel Room Rate ($)Fees

Third‐party Internet Sales 167.95

Franchisor‐Delivered Sales 165.90

Travel Agent Sales 151.50

Walk‐Ins 149.95

a) What is the net ADR yield on rooms delivered via the hotel's third‐party Internet
partners? (4 marks)
b) What is the net ADR yield on rooms delivered via the hotel's franchisor?
(4 marks)
a) What is the net ADR yield on rooms delivered via travel agents? (4 marks)

b) What is the net ADR yield on rooms sold to walk‐ins? (3 marks)

(Total 15 marks)