R/508/0486 - Discussion On The Elements Of Cost And Profit

University: UK College of Business and Computing

  • Unit No: 10
  • Level: Post Graduate/University
  • Pages 12 / Words 3000
  • Paper Type: Assignment
  • Course Code: R/508/0486
  • Downloads: 22
Question :

The report is based upon UK based hospitality company that  are growing in term of  sales and return on equity thus financing strategy are formulated by the managers and to implement them various task need to be undertaken such as:

  • Identification of the sources of funds
  • Discussion on the elements of cost and  profit 
  • Analysis of the financial statements as well as financial ratios  
  • Determine the cost as variable, fixed and semi-variable
Answer :

INTRODUCTION

Fund management is the prime need of every business unit in terms of analysing the costs as well as making effective plans for future. In the hospitality business, there will be a need of having an appropriate planning, administration as well as execution of the operational requires in business. Therefore, it comprises with various accounting treatments such as sales, forecasts, budgets, estimated cash flows etc. It enables the managerial professionals in planning and administrating the needs of business operations. In the present report, there will be a discussion based on various analysis as well as determination of facts that will be used for generating the accurate business objectives. Similarly, there will be preparation of various costing and budgeting methods which will be helpful to make effective analysis over operations.

TASK 1

2.1 Elements of costs and gross profit margin and operating expenses incurred in a Restaurant

To ascertain various elements of costs and operating expenses which were being incurred in a restaurant business is that which are mainly relevant with making effective sale of products and services to consumers. Basically, it comprises with preparation of food and beverages which consists of various ingredients to be used in producing such goods and services. The sales made by a firm in a period will be recognised on the basis of its revenue after deducting costs such as gross profit (Ma and et. al., 2019). Moreover, analysing this gross profit will bring an effective determination of facts that there has been the use of labours, costs, materials in producing one article. These are charges which needed to meet by business for appropriate productive gains and growth in efficiency. However, the costs can be classified on the basis of its elements such as:

Material: In a restaurant business, there have been various costs and expenditures relevant with purchasing the ingredients for preparation of meals and beverages. There has been preparation of various meals and beverages by considering ingredients as per consumer demands for several meals (Jones, Hillier and Comfort, 2016). However, in order to meet such demands of the consumers there is a need to have an appropriate development of techniques and operations which will be effective and helpful for businesses.

Labour: The labour involved in producing the services and products for consumers are mainly relevant with the cost of making them. Payment for salaries, commissions and allowances to employees who are enrolled in businesses. There has been an appointment of various workers in a hospitality business such as chefs, waiters, receptionist, cleaners, managers, suppliers etc. therefore, in order to make implication of job duties in operations there will be need of having appropriate remuneration payable to them.

Expenses: It involves costs like electricity, insurance etc. which in turn helps indirectly in making productive efforts as to generate fruitful gains to any business. It also involves rent and overhead expenses which are directly and indirectly charges to consumers. Additionally, it can be said that the costs of products and services will be a helpful tool in determining the prices of such services. Therefore, the prices are needed to be convenient for the consumers as well as effective for business to cover- up all costs and meet the operational gains (Arif and et. al., 2016).

However, in order to meet the requirements of business as well as for better administration or execution of work, there is a need to analyse various costs relevant with controlling such as direct, indirect, fixed, variable, step and semi variable cost.

Direct Costs: These expenses comprise manufacturing of products and services. Therefore, it includes labour, material and relevant costs which are necessary to be made by business professionals as well as will be charged over products and services dealt in business. In restaurants there has been various expenses such as purchase of raw material such as ingredients, spices, vegetables meat etc. which is to be required. Moreover, to perform production and performing business activities there is need to have effective appointment of talented and skilled workers. The remuneration payable to them will be directly charged to the consumers.

Indirect Costs: These are expenses which are indirectly charged by organisation professionals as to meet business requirements on the right time (Radojevic, Stanisic and Stanic, 2015). However, it includes expenditures which are mainly incurred in facilitating accommodation services such as electricity etc.

Fixed Costs: These are costs which bring fixed amount of costs in all the period remain constant and unchanged. Therefore, there are several various costs such as rent, advertisements, electricity, gas and salaries to employees will have homogeneous charges for longer period. These are charges which does not have changes as prices remain unchanged.

Variable Costs: These are costs which vary as per demands in a period. Therefore, it does not have same amount of funds as it reflects in Fixed cost techniques. These are mainly relevant with purchasing of materials as well as making effective analysis over business operations (Mar-Molinero, Menéndez-Plans and Orgaz-Guerrero, 2017).

Semi- Variable Costs: These are generally incorporated with costs which incurred as and expand as per rise in the level of demands in operations. For, instance in kitchen area, there will be a rise in the demand of meals and products which are being offered by business professionals that in turn has the positive impacts over the rise in costs as per consumer demands in the restaurant as well as the prices of the material which are being use in preparing the meals for the consumers. On the other side, it will become semi-variable as if charge amount of gas, electricity and relevant elements will charge a fixed cost is constant increment.

2.2 Ascertaining the methods of stock controlling and cash in business

To manage resources in an organisation, there is a need to have an appropriate management of operations with the help of managing two techniques such as cash control and inventory control techniques. Therefore, there can be use of several techniques such as:

Sock Control Techniques:

To ascertain the requirements in business operations as well as demand in the market, there is need to have appropriate management of inventories in the firm. In relation with the hospitality industries, there are various activities which in turn will bring suitable control over business operations (Jung and Yoon, 2016). However, in relation with operating industry in the service industry, there is a need to have appropriate determination of effective techniques which will be helpful to business such as the following:

Just in Time Inventory Management: In accordance with making suitable determination of the demands in the market, there will be use of just in time techniques. Therefore, it will be a assistive method which in turn will be helpful and effective to business as to make appropriate analysis over needs of a business. Therefore, to manage the requirements of inventories in a restaurant there is a need to have an effective control over costs.

ERP Software System: Implicating the use of ERP system in computer devices of a restaurant business, it will bring an appropriate determination of inflows and outflows of the inventories used in the business. Therefore, there will be appropriate determination of the operations which in turn will have effective analysis over demands generated in the market as well as level of expenditures made by firm. This computing technique brings mobility, promptness as well as accuracy in analysing the data set at any time. It will be a fruitful tool to the manager so if the business as it records all the past data and which in turn will have appropriate gains and revenue collection.

Records of Stock in Financial Data Set: the implication of various computer software and offline techniques of recording the business requirements there is need to have appropriate records in the data set of the business. Therefore, to retain appropriate information regarding inflows and outflows of the inventories, it is necessary to have a satisfactory report for the proposed data set (Moreo, Green and O'Halloran, 2018). It funnels the managerial professionals in analysing the production level and the assistive changes which are needed to be made in the premises.

Cash Control Techniques:

To ascertains and manage the cash balance in the books of firm there is a need to adopt several techniques of financial tools which positive impacts over will have helped in keeping adequate records of all the transactions. However, there have been influences of various techniques such as:

Set Cashflow Targets: it enables the professionals in hospitality sector to have appropriate control over inflows and outflows during an accounting period. Therefore, there will be satisfactory management of cash transactions in the firm which in turn improves the cash availability in the books of accounts (Small business tips: 10 steps to cashflow heaven, 2018).

Agree Clear Paying Terms: the payments made by frim and the debtors needed to be on clear terms. Therefore, there is need to have appropriate analysis and clear follows up which will be suitable and satisfactory to the business professionals. However, this technique helps the business managers in terms of having promptness in operations as well as also having a well-structured framework (Ryan and Wang, 2017). It assists them in making appropriate internal audits.

Offer a Fixed Payment Package: to offer consumer a fixed rate package which helps them in meeting the target aims and level of desired profits in the required period. However, from service industry, this technique will be effective and most appropriate in terms of retaining the satisfactory amount of profits. It will be beneficial in terms of over come with the level of spend costs in business o

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