Costing and Pricing
- Pages: 10
- Word count: 2492
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The process of setting prices within the business enterprise involves two
steps. The first involves determining the cost swhich will be used as the base for setting the price and the second step is the actual setting of the price. The procedures used by the business enterprise employs to determine the costs that will be used in setting the selling price of a product before actual production takes place and hence the actual costs of production are known are known as costing. Derived from the management accounting procedures used by the enterprise, costing procedures are based on a estimated, normal, or standard volume of output or capacity utilization and can range from determining estimated enterprise average direct costs to determining the normal or standard average total costs which consists of normal average direct costs, average shop expenses, and average enterprise expenses, with average shop and enterprise expenses together being the enterprise’s average overhead costs.
The relevance of normal or standard capacity utilization in costing is that it enables the price administrators to determine costs. That is, since the enterprise’s average direct costs, average overhead costs, and average total costs are different for different degrees of capacity utilization, it is necessary to selected a particular capacity utilization if costs for pricing are to be determined. Pricing refers to the procedures the business enterprise uses to set the price of a good before it is produced and placed on the market. That is, starting with the costs determined by its costing procedures, the business enterprise then adds a costing margin to costs or marks up the costs to set the price. Finally, the price is the enterprise’s actual selling price which is determined via its pricing procedures and therefore is set before production and exchange takes place.
1.The following control procedures are used in Morgan’s Fishing Excursions for cash disbursements: a. The company accountant prepares the bank reconciliation and reports any discrepancies to the owner. In this situation, the principle violated is independent internal verification. The weakness in this case is the bank reconciliation is not independently prepared. The best way of improving is an independent person should prepare the bank reconciliation and someone else with the same range of knowledge should check it before reporting to the owner. The principle that can improve this is segregation of duties.
b.The store manager personally approves all payments before signing and issuing checks. In this situation, the principle violated is segregation of duties. The weakness in this case is the the approval and payment of bills is done by the same individual. The best way of improving is the store manager should approve bills and payments and the treasurer should sign and issue checks. The principle that can improve this is authorization and approval. c.Each week, Morgan leaves 100 company cheques in an unmarked envelope on a shelf behind the cash register. In this situation, the principle violated is physical control. The weakness in this case is the cheques are not stored in a secured area and it may be misplaced or stolen by someone. The best way of improving is cheques should be stored in a safe or a locked file. The principle that can improve this is management control.
d.After payment, bills are filed in a paid invoice folder
In this situation, the principle violated is documentation procedures. The weakness in this case is filing does not prevent the bills from being paid more than once. The best way of improving is billed should be stamp paid after payment. The principle that can improve this is supervisory control.
e.The company cheques are unnumbered
In this situation, the principle violated is documentation procedures. The weakness in this case in the cheques are not prenumbered. This may lead to the company lost count of how many cheques it has issued. The best way of improving is cheques should be prenumbered and subsequently accounted for. The principle that can improve this is arithmetical and accounting control. 2. Discuss the resort’s problem with specific reference to the strategy it used to achieve its objective. A small resort hotel that caters primarily to the family trade is trying to improve 5% in its rooms occupancy in the coming 12 months. The strategy for achieving this was to convert some unused storage space in the ground floor into a conference room that can accommodate about 30 people. During the first conference, the organizer complained severely about the noise coming from outside where the swimming pool and recreational area is.
What the management can do about this is to soundproof the conference room by adding soundproofing doors and window that prevent any noise coming in form the swimming pool area. Conference rooms that have received a soundproofing treatment will experience lower room reverberations, a collapse in echoes, an increase in speech intelligility, and a more user friendly space. The organizer did complaint about no meals are being served in the conference room and they are advice to have their meals in the resort’s regular dining room where other resident were also seated and they can’t have their discussion in private. The management of the hotel should include 1 or 2 meals that are serve in the conference room into the rates they are charging for the conference. The purpose of serving these meals are to refresh the conference delegates and it would also create more social interaction and networking during these meals breaks. These conference delegates will love it because it gives them chance to have a discussion or get to know each other better and in the same time satisfy their hunger.
Of course, if the conference delegates request for the meal be serve at a specific time, the hotel should try their best to meet their needs. In another scenario, if there were no space in the conference hall to setup a small dining area and they have to direct the conference delegates to the regular dining area, the management should locate the conference delegates to a more private room or a private section where other hotel resident do not have access to, so they can discuss in private. The most importance of all, the hotel management should listen to the feedback to the guest of the hotel and improve their service to try and make the guest happy.
For example, when the first group of conference delegate complaints about their poor conference experience, the hotel management did not make any improvement to their service and they continuously receive bad reviews from other conference groups that in the end leads to the the hotel having a bad name. Following this, the hotel have difficultly getting conference groups to coming in the future due to their bad reputation in handling conference events. The hotel management should listen to feedback of their customer and make necessarily improvement to provide a better experience to all guest staying with them. 3. Feasibility study for medium-priced restaurant
Location: Georgetown, Penang.
Georgetown has a large market for food with big giants like Subway, Dominos, KFC, Pizza Hut, etc. These establishments are the major competitors for a multi-cuisine restaurant for Georgetown as the young crowd is attracted to these places. A major share of the market includes local restaurants which are a unique blend of fast food, local cuisine, north Indian cuisine and Chinese all under one roof .These restaurants also provide meal plans at competitive rates to attract and retain customers. Some of the popular establishments are Snack Shack, Chef Inn, Dishes, Hotspot, basil, Fish Max, Janani Lodge, etc The market also includes fine dinning multi-cuisine restaurants like Atill & Rangoli. Multi cuisine restaurants like Guzzler’s Inn, Saiba, Dollops, Prax, Spice & Ice, Hot & Spicy, Metro Café, etc. It also includes various food stores which provides a full meal to its customer, which mostly consists of simple local or various cuisine food at a fixed price.
There are many food stores all over Georgetown. Food courts are also a part of this market and the concept is very similar to the ones present at shopping malls. The food courts have stalls by different restaurants which provide different types of cuisines. The market for restaurants in Georgetown thus includes a variety of restaurants and each with different pricing schemes. The market can also be segmented according to price but there is more or less the same availability of demand throughout the market. This is due to the abundance of fast food restaurants and scarcity of Fine Dining restaurants. Why the location is suitable to establish a medium-priced operation restaurant is because restaurants in and around Georgetown serve a wide variety of cuisines.
There are many restaurants which serve various cuisines like Malaysian, Chinese, Korean, Mediterranean, Continental, etc. The problem which is faced by these restaurants is to produce authentic dishes as there is scarcity of skilled staff. Thus opening a medium-priced restaurant is beneficial as the pricing policy can be designed to hired staff with at least some experience in F&B to satisfy locals and tourist as the main objective of the restaurants are to provide a memorable dining experience. Marital status of the respondent is also considered so as to understand the number of families who dine out. The following bar graph depicts the results of the survey.
Thus as the graph depicts majority of the respondents are married. This gives a wide scope to facilitate research as the sample size mostly consists of families, therefore the data collected will show the demand for a medium-priced restaurant in Georgetown among both families and students. In this section is a graph to for age segmentation
Thus from the bar graph it clearly shows that the sample has both youth and adults. Thereby giving a wide scope for analysis of the market. As shown in the graph the second highest variable is that of 35-44. Through observation while doing restaurant site visits I was able to notice fast food outlets were majorly populated with respondents within the class 18-24, whereas medium-priced restaurants had a balance of age distribution. Thereby making it a more popular choice in the whole market and not in a particular segment. The first graph show how often the people dines out in a week at a F&B Outlet. From the above graph it can be inferred that in the sample considered majority eat out at an F&B outlet twice a week. There is also a good portion of respondents who eat thrice and once at a F& B outlet. A small amount of the population eats four or five times outside. Thus there is a good amount of demand as the majority of the market prefers to eat out at least twice a week
The above graph clearly demarcates that majority of the sample can spend between RM50-RM150 while dining out. This helps to understand what type of service is also best suited, for example if buffet style service is set up and priced per head at twenty five ringgit malaysia it will be a success, but if the restaurant goes in for a la carte the pricing of individual dishes should consider very high. There is also a large amount of the population who prefer to spend RM50-RM100. But these are mostly families and foreigners and the frequency at which they dine out is lesser than the earlier class. 150 and above ringgit malaysia is the highest and is preferred only by married respondents whose occupation profile is business or service or doctor. The student population prefers the range between 30-70 but the frequency at which they eat out is higher than most of the other classes. Thus the market does have the capacity to spend at a medium-priced restaurant. Results of feasibility study
This study deals with market feasibility and a thorough research was done to understand the market and the potential capacity of the spending power of diners in Georgetown , data was collected and a conclusion is made. Review of literature and articles was carried out and has helped me gain a better view of the matter. The data shows the findings and from the results it can be concluded that the market at Georgetown is a good option to open a medium-priced restaurant.It is also important to discuss the spending capacity of the market, from the findings it is clear that an average person does not mind spending between 25 ringgits to 40 ringgits on a meal at a restaurant. Also the market in Georgetown spend around 30 ringgits on lunch or dinner thus a restaurant at the right price can also be a substitute for eating at home.
Also the market in Georgetown eats out very frequently, majority said thrice a week thus increasing their spending capacity. Thus to conclude it can be stated that it is feasible to open a medium-priced restaurant in Georgetown and there is a population with a good spending capacity who can afford such an establishment. Also from this research it can be concluded that the supply in the market is less than the demand. The major competitors of a medium-priced restaurant are fast food and cafe but their market is getting saturated. Even though there is a high amount of demand for these types of food & beverage outlets there is also a high amount of supply thus balancing it out. But for medium-priced restaurants, the supply is still way below its demand, making Georgetown the ideal location to set up a medium priced restaurant. Conclusion
In this assignment,, I have done a study to determine the violation use in a company’s internal control procedure. By listing out the weaknesses and violation of internal controls that are being practice in that company, i have also suggested an alternative internal control procedure that the company should use for each violation. Then, i have study then error in management that a hotel practices when the management try to increase it revenue by increasing the occupancy. The management came up with an idea to change a storage area into a conference room and targeting the business clients to increase the revenue.
But there are so flaws in the plans and i have given several ways to improve it and to make sure revenue is made with this idea. Lastly, i am asked to do a feasibility report for a medium-priced restaurant. I done my research on an area which i think is suitable for the restaurant. I make my report on the marital status, age, gender, how many times the people dine out a week, on that area and it shows that it is recommended to runs a medium-priced restaurant in that area and the economic shows that it will make a profit and there is a market for it. So this is the whole conclusion of my assignment which i am required to do.
http://www.cliffsnotes.com/more-subjects/accounting/accounting-principles-i/principles-of-accounting/internal-control http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Internal%20control%20systems.aspx#Arithmetic_x0020_and_x0020_accounting_0_1_10_7_0_0_0_0_0_0_0_0_0_0_0_0 http://cas.umkc.edu/econ/economics/faculty/lee/intro-pke/ch5.pdf