Advanced Diploma - Management Accounting

/
CON1'EDERATION OF

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TOURISM' HOTEL· CATERING MANAGEMFNT

118.120 Great Titchfield Street, London, WI W 6SS

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EXAMINATION

CTHCM Advanced Diploma in Tourism Management

Sul?Jut:

Management Accounting (ADTM 211)

Series:

January 2006

Time Allowed:

3 hours

Instructions:

You are allowed TEN J\IINUTES to read through this examination paper before the commencement of the examination. Please read the questions carefully, paying particular attention to the marks allocated to each question or part of a question, and taking account of any special instructions or requirements laid down in any of the questions.

This Examination Paper contains TWO SECTIONS. All questions in Section A must be answered. Aoswer any THREE questions in Section B.

On contpietion oj),o7lr examination:

Make sure that your name, CTHCM membership number, and centre number are clearly marked 00 each answer sheet and any other material you hand in.

Alar/es Ailoeatiort

Section A = 40% of the module grade Section B = 60% of the module grade

CCopynght CTHC~1200h

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TOURISM' HOTEL' CATERING

ADTM 1.11: Management Accounting Examination - January 20()6

MANAG1Mi-NI

Section A - Questions

a) Produce a corrected set of final accounts, (profit and Loss account and

Balance Sheet), for Peter EcImund's Trailer Park. (30 marks)

b) Using tandard ratios an nta es, as well as your own opinions, comment

on this business. In particular do you consider it to be a worthwhile venture

or not, and is there any advice you could give to Peter for the future running

of the park? (10markJ)

©Copyright CTHCM 2006

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ADTM 2 J 1: Management Accounting Examination - January 2006

CONH.DLl\h·IIO:-l UI-

210tml

TOURISM· HOTEL· CATERING

MANAGEMENr

SECTION B

Answer any 1 questions in this sec/ion. Each question carries a total of 20 marks.

Bl

The Imperial Hotel has to set its prices for the coming season using the Hubbard formula. It has 240 bedrooms, a function room and conference facilities. It is open all year and has an average occupancy of 65%. It has capital employed of £5,000,000 and directors want a

10% return after taxation. Taxation of profits is currently 25%.

The iuformation available to you is;

Rooms Division expenses Payroll

Other Dept expenses Unallocated expenses Fuel

Admin and general expenses

Marketing

Maintenance and repairs Interest and depreciation

£960,000 £192,000

£100,000 £68,000 £50,000 £90,000 £120,000

Profits are expected from the other three departments, Food and Beverage £91,800, Banqueting and Conference £30,000, and income from shop franchises £20,000

a) Calculate the average room rate.

(12 marks)

b) Comment on this method of pricing.

(8 marks)

-biCopyngl1t CTf{c--U :1J(J6

ADTM 211: Management Accounting Examination - January 2006

CONH.DI:..Il~' ros Of

~ntml

TOURI~M' HOTEL· CATERING MANAGEMENT

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R2.

Investment decisions

Notc: Please use a NPV table 111 your answer to this question.

Healthyfoods pIc is considering tendering for the supply of meals to a low cost airline. This will be a five year contract. From the following information, appraise the proposal using Net Present Value, Payback and Accounting Rate of Return.

• The firm considers that payback should be within four years and ARR should exceed 25%.

• The initial investment cost 1S £60,000. :

• Selling price of meals will be £2.00 for years one to three and £2.40 for years four and five.

• Cost of meals will be £1.20 for years one to three and £1.40 for years four and five.

• Rent of premises will be £4,000 pa.

• Transport costs 'Will be £4,000 pa.

• Straight line depreciation is used for all equipment.

Sales are expected to be;

Year 1 30,000 meals

Year :2 32,000 meals

Year 3 32,000 meals

Year 4 33,000 meals

Year 5 33,000 meals

Cost of capital is 9%

(20 marks)

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ADTM 211: Management Accounting Examination - January 2006

COt'H~lJl,.ltAT!ON 0.-

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MANAC,F.MEl'-:T

B3.

Frying Chicken

ThIS restaurant opened on the 1 st Jan 2006 with [3000 in cash. It also borrowed some money, £5,000 of which is due for repayment in March 2006. A summary of the next 6 months' figures IS shown below.

Other
Sales Purchases Wages Rent Depn Exp
Jan 2000 1000 700 300 250 900
Feb 2000 800 700 300 250 400
Mar 3000 1250 900 300 250 450
Apr 4000 1600 1200 300 250 500
May 4500 1750 1200 300 250 550
June 5000 2000 1500 300 250 GOO Other information

• Rent is paid quarterly in advance

• Each month £200 of purchases will be for cash and the rest payable one month in arrears

• Other expenses will be paid two months in arrears

• 10% of sales are expected to be on credit, collected two months in arrears.

a) Produce a cash budget for the first 6 months of operation. (10 marks)
b) How much will creditors be at the end of June? (2 marks)
c) How much will debtors be at the end of June? (2 marks)
d) \\i'hat will the operating profit be for the 6 months? (1 mark)
e) Explain why a cash budget should be completed. (5 marks) 'OCopynght CTHCM 2006

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CONl-'f.DICRATIOS Of

ADTM 211: Management Accounting Examination - J"anIJUY l006


MAN{\GE.MfN'l

B4.

Albatross Airlines is a small, family run charter company operating a shuttle service from Luton Airport to Glasgow They operate 2 aircraft and provide 4 return journeys per Jay. The maximum number of passengers per fught is 120 Tickets cost .£14U return. Costs arc calculated on an average load factor of 75%.

Fixed costs per flight; Staff £1000

Airport charges £2200 Insurance £800 Fuel.£4500

Variable cots per return flight per passenger are .£20.

a) Calculate

1. The break-even point.

11. The maximum profit on a load factor of75%

(4 marks) (4 marks)

b) Luton Airport is proposing to increase charges by 10~/o. \-X;'hat would be the impact of this decision on;

1. the brcakeven point

11. the profitability

(4 marks) (4 marks)

c) A pilot suggests dropping the price by £20 to increase occupancy to 80%.

Evaluate this suggestion.

(4 marks)

B5.

For each of the following transactions state where they would appear in the books of the business and what effect each transaction would have on the Tracling & Profit and Loss Account and Balance Sheet.

a) Purchase of wines and spirits on credit terms.

b) Receipts from business customers in respect of balances outstanding on credit sales.

c) Payment of interest on a loan.

d) Repayment of a loan.

e) Provision of goods and services on credit to customers.

f) Payment to supplier for goods already used.

g) Payment of wages to staff.

h) Payment of rent quarterly in advance.

i) A customer going bankrupt who owes the firm money.

j) Payment of last year's electricity bill.

(20 marks)


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CONI'EflF.RArTON OF

OP'l

TOURISM' HOTEL' CATERING MANAGEMENT

118-120 Great Tirchficld SHeet, London, WI W 6SS

EXAMINATION


SJ.I~ied:


Series:

June 2005

Time Allowed:

3 hours

[nJtmction.r:

You are allowed TEN MINUTES to read through this examination paper before the corrm1encement of the examination. Please re:1d the questions carefull~, paying particular attention to the marks allocated to each question or part of a question, and taking account of any special instructions or requirements laid down in any of the questions.

This Examination Paper contains TWO SECTIONS. Answer ALL questions in Section A.

Answer any THREE questions in Section B

On "ompletion of your examination:

Make sure that your name, CTHCM membership number, and centre number are clearly marked on each answer sheet and any other matenal you hand in.


(lCopynght CTHeM 2004

CO~t'elJlllAnON O!'

ADTM 211: Mauageme nr Accounting - Examination -June 200S

TOURISM· HOTEL· CA TFR INC

OCopyright CTHCM. 2005

2

MANAGE~1ENT

SECTION A

/ltlS)ller ;Ill questions in this section. Tbis section carries a total of 40 marks

A 1. How can a firm make a profit but still run out of cash? (2 marks)

A2. What is the money measurement concept) (2 marks)

£\3. W11y is reverse liquidity important? (2 marks)

A4 In addition to goodwill, what other intangible asset might a company have. (2 marks)

AS. What does gearing mean in a company's accounts) (2 marks)

A6. A firm's vertical balance sheet has a net value of £59,000 W11at will it be after the followmg transactions, £2,500 paid to creditors; stock purchased on credit for

£3,780; office desks tables bought for £400 cash (2 marks)

A7. \'Vhat is the greatest risk when entering into a partnership? (2 marks)

A8. How are variances calculated? (2 marks)

A9. What is the principle underlying double entry book-keeping? (2 marks)

AI0. Describe two external factors that will influence the price of an item, apart from

it's cost. (2 marks)

A 11. An excursion company has found that for each $5.00 change in price there is a change in sales of 25. Wuen the price is $25.00 sales are 100. What price should

be charged to maximize revenue? (4 marks)

A 12. Explain how limited companies differ from partnerships. (4 marks)

AU. Show how the following transactions should be recorded in the books of a tour company.

a) Sales of $55 on credit to a customer

b) Purchase of $400 of equipment on credit

(4 marks)

A 14. \Vhat does a cash flow statement show?

(f. marks)

AIS. Explain how stock turnover is calculated and why it is important.

(4 marks)

CO"tt.1H~"'J[['''' or

ADTM 211: Management Accounting - Examination =Juue 2()05

TOURISM, HOTEl, CArE1UNG

MANA(';rMFNT

SECTION B

Answer m~)'} qUf.rliol1.f in Ihi; section, Eath question carries a tol(1/ ~f 10 mares.

Bl.

World's End Excursions

From the following information produce the Trading and Profit and Loss Account

and Balance Sheet for the World's End Excursions, (16 marks)

Trial balance as at November 30th 2004

,- ! }

£
Capital / i: , -205,000
Cost of sales -r / , " .. ;:-' -f. ... 28,000
"
Sales /, ,'1(' ,'./ ", -609,000
,
Coach ',' ~ K 9,500
Coach expenses "';'i f' -I 3,180
Repairs to office bwldings""!2 I 8,480
Freehold land and buildings r , : ; - 100,000-
t\ --
Bank 1 .. '\ 5,400
I, ,~
-- ----_- " 1,
Furniture and fittings , ~ 14,600
\X'ages and salanes ,67 -_...,,- ... ,. 386,060
-
Discounts allowed ,~; h- "~ 10,610
Discounts received ,~ I • I . -8,140
Drawings I 24,000
Insurance ~ ,'~ ,{ 2.,480
1:,.\
Debtors .. 52,130
"
Creditors -40,350
General expenses ... ,r; 218,050
f"-
0 Notes:

The insurance figure is for 12 months from July 1" 2004, (;"

One month's wages and salaries were outstanding on Nov 301h, a total of £24,550 'v' Accrued fuel charges for the coach amounted to DOO 't)

Create a provision for bad debts of 3.4%!~

Depreciate furniture and fittings by 1 0%\1'

Comment on the profitability of the business,

©Copyright CTHCM. 2005

3

(4 marks)

TOURISM' HOTEL' CArERING

AOTM ZII; Management Accounting - Examination -June 2005

R2.

The Luxury Lodge chain of mid-nurket hotels is planniJlg on a major expansion into E:lslern Furope. All of the Lodges will be identical in size anti design and will be built Oil a modular basis. Each Lodge will cos t $7.0 million and the company require a return on

their investment or 12%.

The expected annual running costs are as follows:

Running costs for the building \'(!ages and other staff costs indirect materials

Insurance

Administration costs

$ 325,000 450,000 5,700 12,000

LJ 500 802,200

Each Luxury Lodge has the following 70 twin/double rooms and 15 family rooms. The twin/double rooms are expected to have 85% occupancy and the family rooms 600/0 occupancy. The price of the family room is to be 1.5 times the price of the twin/double

rooms.

a) Suggest a price per night for each room types that will meet the investment return targets of the fum Show all

your working.

(8 mar/es)

b) Comment on the validity of this method of pricing.

(4 marks)

c) 'What other factors should be considered when setting its prices?

(8 marks)

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ADTM 211: Management ,\ccolllltil'g - Examination -June 2005

~n(l1il


MIIN,\Ci:.MENT

b) From the following information produce a budgeted trading and profit

and loss account for the Moonr:lker Restaurant for the next year. (15 marks)

133.

Heaven's Gate Restaurant Covers 2000; ASP £20; Fixed costs [7,000; Variable costs £1 (i,OOOSeml-vanable costs [6,000 plus £3 per cover.

a) From the above information dow a break-even chart with a range of 500

covers to 3000 covers. Ensure you label the graph clearly and correctly. (8 marks)

b) Calculate the break-even point, showing all your working. (6 marks)

c) Comment on the business. (4 mares}

d) \Xlhat advantages does the chart have over the calculation? (2 marks)

See graph paper attached

B4

a) Explain why all businesses prepare budgets. (5 marks)

Food sales:

50 lunches per day Monday to Friday with an ASP of £16.00

45 Sunday lunches per week ASP £1750

120 dinners per week ASP £22.50

30 wedding receptions with an average of 120 guests ASP £14.00

Liquor sales Lunches £3.50 ASP Dinners £6.50 ASP

Wedding receptions 7.50 ASP Bar sales £800 per week

Cost of sales Food 38% Liquor £32%

Costs: Salaries and wages £ 124,000; fuel £4,100; Insurance £3,600; Linen hire £ 7,600; Cleaning materials £ 3,800; Admin costs £5,300; Maintenance and repairs £24, 900

OCopynght CTHCM. 2005

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TOURlSM' HOTEL· CATERlNG

M"NAGf.ME~T

ADTM Hi: M"n"g~lll'lIt AC(Qllnting - ES"!!lillation . .lune 200'i

B5.

a) Explam the term opportunity cost (4 marks}

b) A tour company is considering whether or not to replace its old coach with a new one. The relevant information is shown below. Using two

different methods, advise the fum on whlch option is me best.

Explain your answer. Current interest rates are 5%. (16 marks)

I-::-:- Keep old vehicle Buv new vehicle
Year 1
Coach price -33,000
,Ye_Es and servicing -3,000 Nil
Ticket sales 12,000 15,000
Fuel and spares 4,500 -2,000
Year 2
Repairs and servicing -3,500 Nil
f----:-
Fuel and spares -5,000 -3,800
Year 3
Repairs and servicing -5,700 -1,000
Fuel and spares -5,500 -5,000 At me end of 3 years the old coach is worm nothing and me new one is sold for £10,000,

ocopyright CTHCM. 2005

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ADflM Questions Dec 2004

ADHM 231. and ADTM 211 Management Accounting exam questions

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1. Define the term "semi-variable costs" and give two clear examples.

Section A

(2 marks)

A11s: Costs that change with sales but not in proportion. Laundry, fuel, PT labour.

2. \-x,bat would be included under the heading Direct Varjable Costs [or a t3ke-away food business?

(2 marks) ""CriL sQ\..LQ.. -"> fY"\ ('V~ c.os-t

Ans. Food & beverage costs, disposahle food containers, napkins, hrlvc-aways.

3. Does depreciation always show the true drop in value of an asset? (2 marks)

Ans: No because it is based upon a~ and assets may decrease by more or less than the depreciation.

r'> fIXL, t2.,l~",CR s\,._eJL-\.

4. \X!hat is good\V;.ll a\i-d where does it appe~r in the final accounts? (2 marks) ,

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Ans: It is the difference between the net value of the assets and the value of the firm. It

appears as an Intangible Fixed Asset -') Wv--.oro{..- r> e d J

[To--'3' ·h.(. 00' A ~ d_Qr'cvo!.d

5. \XIbat is ROCE and why is it important? (2 marks)

Ans: It is the return on capIta emplo e and indicates the percentage return on the

investment. It should excee oth the commercial interest rates and inflation.

~¥I,~, j·h due.

6. A firm's vertical balance sheet aN et Asset balance figure of £159,000. The following items

were omitted: Insurance accru £3,000; Debtor £250. What is the correct figure? (2 marks) 14'1'\1< 4~~~k IV'-~"'" ~\l-~c..

Ans: £159,000 - £3,000 + £250 = £156,250

7. If the gross profit percentage of a firm was satisfactory but the net margin percentage was less than expected what would you investigate to discover the reasons for this? Give reasons for your answer. (2 marks)

Ans: As net margin is gross profit less cost of labour it must be a problem with labour costs. These include wages, staff meals, uniform, staff accommodation and transport, and any other costs of labour.

8. If the current liabilities exceed the current assets what does this tell you? (2 marks)

Ans: The firm is illiquid and may not be able to meet its debts when they become due. It

is in danger of going bankrupt. 'frl.,_ />.1/ AUU! (t'c,VJ/V ""'lVV7 Ik 'It'.i.

9. Explain the difference between Revenue Expenditure and Capital Expenditure. (2 marks)

Ans: Revenue Expenditure is money spent to cover the running costs of the firm and Capital Expenditure is money spent on purchasing new fixed assets.

10. Explain the Concept of Prudence

(2 marks)

fA 'VI

AD1IM Questions Dec 2004

Ans: A firm should allow for all losses and not anticipate an profits. Often summarise

as "don't count your chickens until they have hatched".

11 How could the follO\cving transaction be recorded in the ledGer? A firm purchases a coach for £30,000 part exchanging a van v alued at £5,000 and writing a cheque fur £25,000 (4 rnark~

Ans: Debit vchiclt £25,000; Credit B7nk £25,000; ~ ~

Credit Vehicles £5,000 (old van); Debit Disposals £5,000 (old van); H~,l"'(>c _t.\CIO

Credit Disposals £5,000; Debit vehicles £5,000 -r,CQ;'

~

'12, What assets of a firm is it l11ipossihlr- to v,,]ue, which is why they do not appear in the firm's accounts. (4 marks)

Ans:

1. A skilled and loyal workforce

2. Excellent labour relations with the employees

3. A clear com,petitive advantage

4. An excellent location

13. Explain how you would depreciate the following; a) furniture; b) computing equipment (4 marks)

't";ji"'CC:> -),('1"'(

=«:

Ans:

a) furniture should be on a straight-line basis so that each year it is the same. t

b) com pu ti ng eq ui pm e nt on th c. «ducing balance method with a pe<e entage of am und 40% ::is;:;;: -it or,

14. Explain the advantages and disadvantages of expansion by a) borrowin~ monev and b) selling

shares. (4 marks) L Ius ~ .. ~~.,k__

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Ans: Loans are for a fixed sum of interest each year and assuming profits are good then there is no problem, and shareholders can gain a larger dividend. If shares are sold then the owners lose some control over the business, and could be vulnerable to a take over. But if profits are low then there is no need to payout dividends, unlike having to pay loan interest.

15. Explain the relationship between equity, liabilities and assets. What are the four ways equity can change? (4 marks)

Ans: Assets = Liabilities + Equity. Equity changes by profit or loss, drawings or investment - ,___ -- = -==-::::::>

by owners. 0::- ~

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ADl-lM Questions Dee 2004

Section B Question 1

Earl of Derby Resta ura nt

From the following trial balance and further information gIven produce the tn.ding and Prol:it and Loss Account and Balance Sheet for the Earl of Derby Restaurant.

'l'nal balance as at Decem1:>er 31" 200"1

Notes:

Food stock on December ~l" £2200 ,/

liquor stock on December 31" £3050 A./ C(~'1,

Rates pre-paid £1,000 v'. .__ C;

Gas charges accrued £250 ~

(Create a provision for bad debts of 5% Depreciate furniture and equipment by 10% Revalue china cutlery and glass at £41,500

35:'.000
-100,000
30,500
.----------- . ... -------------.__ -125,000 •
15,250
-55,000 I
~_12,OQO
256,000
3,500
-1,200
6,50QJ
65,000
155,000
2,100
2,550
5,800·.
7,800.
5,000 •
55,000
4,600
2,500
1,800
2,300
0
./ ,. Capital

~e, Bank loan

rl..- Food purchases Fl-Food sales '

p,- Liquor purchases PL. Liquor sales

Ft__ Rates

~ Premises

pL Adm.in expenses o Creditors

t3 Debtors

o Furrurure

j)) Equipment (':) Food stock (') Liquor stock (L Insurance f'v Salaries

ft.-Bank loan interest

;; China Cutlery and Glass rL- Gas and electricity

f'L Repairs and maintenance Cash In hand

t'r Cash at bank

3

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(20 marks)

ADllM Questions Dec 2004

Answer:

Earl of Derby Rcr-;taurant

Trading and profit and loss account for year ending Dec 31st 2004
Food sales 125,000
Opening stock 2,100
Purchases 30,.50Q
~)2,600
Closing stock 2200
30400 30400
Gross profIt 94600
Liquor sales 5:',000
Opening stock 2.550
purchases 15250
17,800
Closing stock ),050
14750 14,750
Gross profit 40,~50
Total gross profIt 134,850
Expenses
Rates 12,000\ 1,000 - 11,000
Adnun expenses 3,500
Insurance 5,800
Salaries 7,800
Bank loan interest 5,000
Gas and electricity 4600 250 4,850
Repairs and maintenance 2,500
Depn
Furniture 65,000 10% 6,500
Equipment 155,000 10% 15,500
China Cutlery and Glass 55,000 41,500 13,500
prov1slOn for bad debts 6,500 5% 325
76.275 76275
Net proEt 58575 4

ADHM Questions Dec 2004

Earl of Derby Restaurant

Balance sheet as at Dece-mber 31st 2004

Fixed assets Cost Depn Value
Premises 256,000 0 256,000
Furniture 65,000 6,500 58,~00
Equipment 155,000 15,500 139,500
China Cutlery and Glass 55000 13,500 41,SOO
531000 35500 495,)00
Current Assets
Food Stock 2200
Liquor Stock 3050
Debtors 6,175 •
Pre-payments 1000
Cash in hand 1,800
Cash at bank 2,300
16525 16525
Less Current Liabilities
Creditors 1,200
Accruals 250
1450 145O
Working Capital 15,075 15075
Net Assets 510,575 Represented by:
Capital 352,000
Net proflt 58575
410575 410,575
Long term liability
Bank Loan 100,000 100000
510575 5

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Question 2

Mama Mia's Restaurant

Mama lvli::\'s Restaurant serves up to 1000 meals per week; the ASP is £18.00,\vith a sales mix of 70%

food and 30% liquor. The food gross profit is 65% and the liquor gross profit is 60%. Other variabJe costs are £2.50 per head. fixed costs (includi ng semi-variable) ::1 re £3100 per week.

Calculate

a) The break-even point in numher of covers and sales vollln1e for the bistro. (9 marks)

b) I low much profit is made if 800 meals are sold each week? (2 marks)

c) 'n1e maximum profit that could be made each week. (2 marks)

d) How many covers must be sold to achieve net profit of £600 pcr week? (2 marks)

e) What would be the breakeven point if the food eost was 40% (5 marks)

Answer

a) Total sales = 1000 x £18 = £18,000

Food sales are £18,000 x 70% = £12,600 Liquor sales are £18,000 x 30% = £5,400

Food cost is £12,600 x 35% = £4410 Fe per cover = £4410/1000 = £4.41

marks)

Liquor cost is £5400 x 40% = £2160 LC per cover is £2160/1000 = £2.16

Variable cost per cover is £4.41 + £2.16 + £2.50 = £9.07

mark)

Contribution per cover is £18.00 - £9.07 = £8.93

Fixed costs/Contribution = BE point

£3100/ £8.93 = 347.14 = 348 covers and £6,264 sales

mark)

b)

800 x £8.93 = £7,144 £7,144 - £3,100 = £4044

Maximum profit 1000 x £8.93 = £8,930 £8930 - £3100 = £5830

d) i600~= 67.19 which is 68 covers above BE 348 + 68 :::: 416 covers •

OR

c)

347.17 + 67.19:::: 414.33 = 415 covers

e). Food cost is £12,600 x 40% = £5,040 FC per cover = £5,040/1000 = £5.04 Variable cost per cover is

£5.04 + £2.16 + £2.50 = £9.70

Contribution per cover is £18.00 - £9.70 = £8.30

(1 mark)

(2 marks)

(1 mark)

(1 mark)

(2 marks)

(2 marks)

(2m arks)

(1

(2

(1

ADHM Questions Dee 2004

Fixed costs/Contribution == BE point

£3100/ £8.30:::: 373.4() = 374 covers and £6732 sales

marks)

(5

7

_____ . ~_g~ 'l.C(t.l-

~~~'--------------------- &

'--_-"""- .... (.,.:.;,.u.._."M"",-i~~ .. 4iI~\J:_--'tl.L!~O.J'~ . ..I.c.;.:::~:!!(}-~,6~~~1 }~~ ~ /V-A I r _

000 -'<

~J lor: __ IS.{ 000 ;.1 0 ('~ -:;0 t fl.1 "00. __ ____ 0~ 30('; _!!_o\'O fZ :'0% = ~ s_ 4:00 __ .

000 = c 04

_ 'l;; ( ("0/ t' tiO t /


Question 3

The tables sho-w a three-month hudgeted cash flow and profit & Joss account for the Bedford Hotel.

Complete the tables using the actual results. (15 marks) Comment on your answer (S marks)

Student name .

number .

CTIICl\1

The cash flow for three month"

-
Jan Feb March
Bu?get Acrual Variance Budget Acroal Variance Budget Actual Variance
Sales
---
Cash 9000 9000 9000
Credit (from debtors) 0 Q 1000
- t--- t-
Total 9000 9000 10000
-t--- -
t--
Food and Beverage creditors 10UO 4000 4000
-
Overheads (creditors) _)UO 1500 1500
f-----
Labour 2(100 2000 2000
Capital expenditure 4000
Drawings 1000 1000 1000
t--
Total 4500 .8_,2D_Q 12500
Balance 4500 500 2500
Opening balance 1000 5500 6000
Closinz balance 5500 - 6000 ! 3500
.-~ (10 marks)

The profit and loss account for three months

8

Budget Actual Variance

£ % £ % £ °/0 £ °/. £ % £ %
Sales 30000 100.00
Cost of sales 12000 ~
Gross profit 18000 60.00

Expenses -.
Labour 6000 20.00
Overheads 4500 15.00
Loan in teres t 120 0.40
Depreciation 180 0.60
1DM1D l6JlQ 10800 2Ql)Q
zzoc ~
(5 marks)

AOHM Questions Dec 200'~

The actual results were:

Sales were [12,000 per month, of which 10% were on one month's credit

Food and beverage costs were 38% of sales, and ooe months credit is eiveu on all purchases

Stock levels remained the same

Labour costs were £2200 per month

Overheads not includ:log depreciation and interest are [1600 per month

Depreciation is £90 a month

Loan interest is 160;(1 a year paid half yearly in June and December

Drawings were £1100 per month

Capital expenditure of £SOOO was paid in March

ENSURE yOU HAND IN THE COMPLETED TABLES WITH YOUR ANS'WER BOOK

9


Ans:

The cash flow for three months

-
Jan Feb March
- 1--
Budget Actual Variance Budget Actual Variance Budget Actual Variance_
Sales
Cash 9000 10,800 1,800 9000 10,800 1,800 9000 10,800 1800
s:.ieillt (from debtors) 0 0 Q 1200 1,200 1000 1200 200
Total 9000 10,ROO 1,800 9000 1 :',000 3,000 10000 12,000 2000
0 0 0
-
Food and Beverage cr editors 1000 1000 0 4000 4560 )60 4000 4560 560
Overheads (creditors) 1500 500 0 1500 1600 100 1500 1600 100
Labour 2000 22UO 200 2000 ~~OO 200 2000 2200 200
Capital expenditure I 0 0 4000 5000 1000
Drawings I 1000 1100 WO 1000 -, 1100 100 1000 1100 100
-- 300 8500' 125001
Total 4~UO 4800 9460 960 14460 1960
Balance ~ -"'fcC' ~(,.,pJ 4500 6,000 1,500 500 2,540 2,040 -2500 -2,460 40
~perung balance 1000 1000 0 5500 7000 1,500 6000 9,540 354U
I-- __
Oo;ing balance 5500 7000 1,500 6000 9,540 3,540 3500 7,080 3SOO
-- Th

f hr

fi dt

e pro It an ass account or t ee mont 5
I
Varian
Budget Actual ce

£ % £ '10 £ % £ % £ 0' £ %
10
Sales 30000 lUO 36000 100 6000 U
Cost of sales J:2000 40 13680 38 - - 1680 -2
Gross profit 18000 60 22320 62% 4320 2

Expenses
Labour 6000 20 MOO 18.33 600 -1.67
Overheads 4500 15 4800 13.33 300 -1.67
Loan interest 120 0.4 120 0.33 0 -0.07
Depreciation 180 06 270 0.75 90 0.15
10800 36 1@QQ 10. 11790 32.75 11790 3275 990 -3.25 990 -3.25
12flQ 21 10530 29.25 3330 5.25 Comments

A. profitable business making 30% net profit on increased sales due to fixed costs reducing as a percentage. Due to spending more on capital expenditure in March it has less cash than planned. Cost of sales has gone down as a percentage, and this needs investigating (5 marks)

to

ADHM Questions Del.: 2004

Question 4

The following is a revenue account from the Nico's Rcstauranr.

r-r-r- Cost of sa12s
Sales Cross profit
- -_ ----- £ £ £
Food 240,000 76,000 164,000
t------. -.--------~--.-- -.-- ------ ---~----~-- ---
Beverages 80,000 33,000 47000
Total --- _-_----
J20_,_QOO 109,000 211,0001

Less expenses -~-- -------~--
Salaries and wag~s--- -- ---------- 82,000
Laundrv 8,000
Gas and electricity 3,600
Repairs and renewals 4,000·
Other operating expenses 24,000- ---;
Administration 8,000
Insurance 1,600
Rent 12,000
Depreciation 20,000
Interest 12 000 175,200"
c
Net Erofit 35800 Nico has also provided you with the following information.

a) 111e number of covers served during the year was 7,000 at lunchtimes and 11,250 at dinner

b) Revenue is split 40% lunch and 60% dinner

c) Food and beverage costs are in direct proportion to sales

d) £60,000 of the labour costs are fixed; the rest is variable.

e) Laundry is variable-with revenue -e.,

f) £2,200 of the gas and electricity is fixed and the rest is variable

g) Other operating expenses includes £5,000 fixed costs '

h) Administration, insurance, rent, depreciation and interest are all fixed

~ Calculate the ASP for both food and beverage at lunch and dinner. (2 marks)

b) Calculate the gross profit percentages for both food and beverage (2 marks)

c) Calculate the restaurant's total variable expenses and express them as a percentage of total revenue. (3 marks)

d) Calculate the restaurant's total fixed expenses and express them as a percentage of total revenue. (3 marks)

The local restaurateurs association has provided the following information to Nice. It relates to restaurants of a similar style to his, and shows averages for a number of items.

e) Complete this statement comparing the Creme de la Creme's performance with the average of local restaurants (6 marks)

f) How does the net profit compare with other restaurants? (2 marks)

g) Is this a valid type of comparison? (2 marks)

11


CTHCM

Student name , ..

number

•• ~ •••• ., ••••••• * •••• ~ /~ ~1..Q (
~ '"
--._._ -.~- -.--- -- . __ .,_._ ,-_,._ --~--- { I (Percent oiG:evel.lJ.la!: _) _____
Item Nico's
Food sales "- 70-80 --- -
Beverage sales "- 20-3Q/ ~------ - - - ~
Total sales 100 -
. ----------_---
Cost of sales 35-44
- -- - - - -
Gross profit 56-65 I
--_._--. __
Salaries and wages 30 - 38
Laundry 1.5-2
Gas and electricity 2-4
'-
Repairs and renewals 1-2
Other operating expenses 4.3 -15
Administration 3-6 .-
Insurance I 0.8-1
Rent 4.5-7
Depreciation 2-2.8
Interest 0.3-1

Total expenses 52.4-65.5
-
Net profit before tax i 1.5-12 ENSURE YOU HAND IN THE COMPLETED TABLE WITH YOUR ANS\~'ER BOOK

12

~.4 ~r-1"f

_.-

C ~\_t ~/l{j~~

i , Q 'I

'2. 11 6';/

tn.,} (e \-w'" (c

V'c.':l-~, ~

lU-"CJf/)L

s:..~ .~ il. A<!J A}l~ \'L....\i\c"" ~ .. ~

._-

fi.-<J.c! A)\e.:{~

ICem

-~

10(0(( J 110,(-'c

, ,'"

1COJ"

Ans:

a) ASP Lunch Dinner

food 13.72 [1,76

drink 4.58 3.92

b) Gross profit Food

Beverage

68,3% 58.75%

c) Variable costs

£ 50,400

15.75%

d) Fixed Costs

£124,800

e)

Item Percent of revenue Nico's
Food sales 70-80 /5 I
Beverage sales 20-30 25
Total sales 100 100

Cost of sales 35-44 34,06
--
Gross profit 56-65 65.94

Salaries and wages 30 -38 25.6
Laundry 1.5-2 2,5
Gas and electricity 2-4 1.125
Repairs and renewals 1-2 1.25
Other operating expenses 4.3 - 15 7,5
Administration 3-6 2.5
Insurance 0.8-1 0,5
Rent 4.5-7 3.75
Depreciation 2-2.8 6.25
Interest 0.3-1 3.75

Total expenses 52.4-65.5 54,7

Net profit before tax I 1.5-12 11.2 o This is towards the op end of the range and Nico should be satisfied, although it is always best to try and improve results, and not become complacent, This NP is helped considerably by the high levels of GP for food and beverage

g) This is a reasonable comparison to make as all firms can benefit from knowing how they are faring, It can also highlight areas where Nico is below average and needs to improve, In this case depreciation and interest are above average

Note. If a student has made errors in the calculations then their comments should reflect their answers, which may mean they are different from those above.

13

(j) -r;'JL~ d A~ 'SeA,,:: I" .----Lo-v-J

Q.v'\.tloV"'--\

Qt}cJ ~tAi~"'vV'~

~41 -:,00
IO~ o CO \ \ 0).rO
I
'2. c o c- l15
\
{q4 ~Q7 ~(r'1r
I
:::::::;:::::=. - ____
( ) J l~\ @ ~l Atse-e,\:, .-----

f3,CJvV~

Ac...V'yt.d ~~

\ z, 0 -I :y:; ... lee

""" , ('c ... ' I,"CC .. 1°<>0

4 c, 0Ce> t IIO~

-

~t-ff 3CO lOe ,ro

,

.--.~---~

~I (;~O (q_S(\O.r

(r/IOOo

-

-

------ ... --

'H_ ace/" ~ rl ~ OQC~ ~ It a

------~~'-/7_~+~~ ~l~,lro-~JT-~~+-----------------------------

------------------~,------------

( s or; toc(_

- - .. _--_._._--------------------------------

'",


Question 5

Using the information given produce the following information for the Bedford Restaurant

a) Sources and Application of Funds Statement (10 marks)

b) Cash Flow Statement (10 marks)

Quarter ended June 30th Quarter ended Sept 30th
Sales 220000 200000
Opening Stock 1000 12000
Purchases 70000 70000
80000 82000
Closing stock @QQ nooo
Cost of sales 6800Q 680£).9 Q2Qill2 69000
Gross Profit 152000 13100
Wages ~OOQ _5j_Qill2
Net margin 102000 77000
Overheads 46000 5000_Q
Net profit 56000_ ~
1..-t!99° Balance sheets

As at June 30th

As at Sept 30th

Cost Depn Value

Cost

Depn

Value

Fixed assets
Premises 220000)1.. 220000 200000} 200000
Fum. & Equip 5000o_,( 6000 44000. 800001 8000.' 72000
270000 @9 264000 . 280000 @ 272000
l
Current assets \ /
Stocks 12000 18000
Debtors 6000 14000 •
Bank (8002) . 0?E!1
?6000 26000 46000 46000 Less current liabilities
Creditors 10000 1100
Overdraft Q Q
10000 10000 llillD 11000
16000 16000 lSDoo llQQQ
780000 _ 307000
Represented by:
Capital 24000., 280000
Net profit 4000Q 270012
?800QQ J8GOQO_ 3Q7QQO 307000 1,-o..-ol--.l,.\, Pre'" \ ,.._ L-o~l /cc."".'v"'{

~t)O/ tL..,... rQ-{'·"d <:>.I~'

-hi J"""v - ~I\J ).<_A....

t

l'4.O>l"'~~c.... (4cc ' ~('~ Oi\"CR. \'"'rr ~~

Ee,_~cA~ (4"c~'l.~' LV <A kv- ( 'LC'e -e (c:C)

(1.fCO - Z,t roY '-- .'

\O-~<lv'1

kc-v!-\ Y' ~~Jf<Y'7~ l. (",teo ~ I,Ge'C'\

~J.~v'\~

Cbl'(>- ~lA-[~'\J

4ll'c.' '300 CDC

"7.fO

SCoCJ

I

41~OO

l ~SO

I

('LX'

t (OS

I

-i=:

j

1


Answer

Sources and Application of Funds Statement

15

£ £
Net Profit before depreciation 29000
- ~--~-~ - -.-~-~- l
Changes in non operational funds
Sale of fixed assets I 20000 20000
- - --_ ~ ----_j~------ 19000
1----- ------.--
Purchase of fixed assets 30000
19000

I Changes in working capital
Increase in creditors -1000
_.-. --
Increase in stock levels 6000
Increase in debtors 8000
Increase in cash/liquid assets 6000
19000
-- Cash Flow Statement

£ £
Cash at start 8000

Sources of cash
Net Profit before depreciation 29000
Sale of fixed assets 20000
Increase in creditors 1000
50000 50000
58000

Uses of Cash
Purchase of fixed assets 30000
Increase in stock levels 6000
Increase in debtors 8000
44000 44000

Cash at end 14000
~ (O~. O(lo

.---

(£D,-ILI

~~ ~~~

1;1

3,,,f~

C{ £,(C/~~ ')

._ "~~C'

4oso (.-v-v '1 v",I\..~)

(7nc> +- r~O

----

IlLrO

_._ 2, --(?-.:' C?) ..Iik- r eNI\(" 1.. ,z.~ ;) '1 <>\;\.0' M,a--(

"" ./

fb. ~oo -",;0

(i!,lS-t_9

"'l.,C("'c

.of <~(" I. \....... jAw-vlA

~~

tf? os '?_ exiT

--------------

CONFEDERATlO0l OF

~In- 1m!

~ill . Ilml

TOURISM· HOTEL· CATERING MANACEMENT

11 R-120 Great Titchfield Street, London, WI W 6SS

EXA_.\;IINATION

CTHCl\f Advanced Diploma in Hotel Management

Subject:

Management Accounting (ADHM 231)

Series:

September 2004

Time Allowed:

3 hours

Instructions:

You are allowed TEN MINUTES to read through this examination paper before the commencement of the examination. Pleas_e read [he_~~.ti_ons q_refull~, paying particular attention to the marks allocated to each question or part of a quesuon, and taking account of any special instructions or requirements laid down in any of the questions.



On <'ompletion ojYOllr examination:

Make sure that your name, CTHCM membership number, and centre number are clearly marked on each answer sheet and any other material you hand in.

lvIarks .Allocatio»


roCopyright CTHCM 2004

ADHM 23J: Management Accounting - Examinatiou =September 2004

MANAGEME;-"'T

SECTION A

~'1I1swer all questions in this section. This section carries a tota! of 40 marks

A1. How is contribution calculated? - ~);.; \\111 PI, (_ e

V'l'l \

. ,,'\1.,>. (- i' .. '.:: t Jr \...." I •

(l ~,)(\. '-~J

~ (2 mares]

1\2.

\\!hat is the margin of safety?

/2 1 ·1 ( marR..!;

A3.

\Vhat is the difference between re-valuation and depreciation?

(2 marks)

A4.

Wby will a firm show goodwill in its accounts?

(2 marks)

A5. Name two factors that need to be taken into account when considering the ROST of a

firm and explain why, (2 marks)

A6. A firm's vertical balance sheet has a balance figure of £59,000. What will it be after the following transactions,£4,500 from debtors received, stock sold on credit for £1,200,

tables bought for £400 cash. (2 mark.r)

A 7. If the net margin of a firm "vas less than expected what would you investigate to discover

the reasons for this? Give reasons for your answer. (2 mares)

i\8.

Hew would most firms classify fuel costs, apart from being an overhead?

(2 marks)

A9. Comment on the following. A hotel with a net asset value of £1,5 mi.llion made D4,000

profit. (2 marks)

A10. From the following list of accounts of Jones and Wing Ltd. Calculate the working capital of the firm.

Stock

£250 Cash £1,000
.£3500) Creditors .£570
£560 Rent £1,000
2,450 Cost of sales D,OOO
£950 Accruals .£2,500
.£670 . Dividend owin .£800
(2 marks) Debtors

A 11. \\!hat items would normally be found in the appropriation account of a partnership?

(4 marks) A12. Explain the Concept of Materiality and give items of how this is put into practice.

(4 marks)

©Copyright CTHeM, 2004

2

TOUR 15M' HOTEL' C/\TERING

ADHM 231: Management Accounting - Exam illation -Sept~mber 2004

A 13. Show how the following transactions should be recorded in the books of a business.

a) Sales of $55 on credit to a customer

b) Depreciation of $400 on eguipmcnt

(4 marks)

A'14. Explain why firms produce a statement of sources and applications of funds.

(4 marks)

A 15. Explain how both the debtors' ratio and the creditor's ratio are calcuhtcd and what

they say about the firm. (4 marks)

3

':QCoPYrlght CTHCM. 2004

t:ONHD1:.JI,1.1 10:-'; 1,)1'"

TOURISM· HOTFJ,' CATERING

ADHM 231: Management Accounting - Examination September 2004

MANAGEMENT

SECTION B

.Ansiuer any 1 questions in this section. Each question carries a total oj 20 mares.

HI.

Summerland Restaurant

From the following trial balance and further information given produce the Trading and Profit and Loss Account and Balance Sheet for the Summerland Restaurant.

Trial balance as at December 31" 2003

Capital Bank loan

Food purchases and sales Liquor purchases and sales Rates

Premises

Admin expenses Debtors and creditors Furniture

Equipment

Food stock

Liquor stock Insurance

Salaries

Bank loan in teres t

China, cutlery and glass Gas and electricity Repairs and maintenance Cash in hand

Cash at bank

£'OOO's
610
305
82
3300
50
140
520
602
42
51
19
709
96
254
345
41
6
102.
17:27~ LOOO's 300,0 1660 1735

765

114

Notes:

Food stock on December 31" £44,000

Liquor stock on December 31" £61,000

Rates pre-paid £16,500

Gas charges accrued £19,000

Create a provision for bad debts of 5% Depreciate furniture and equipment by 10% Revalue china, cutlery and glass at £221000

(20 marks)


4

ADHM 231: Management Accounting - l':xam ination =Septcmbe r 2004

TOURISM· KOTEL· CATER tNG

lv\.6\N,\GEM[NT

--------------------------------------------

B2.

Wong's Chop Shop serves up to 1600 meals per 'week; the ASP is £12.00, with a sales mix of 65% food and 35% liquor. The food gross profit is 60% and the liquor gross profit is 40%. Other variable costs are £2.50 per head. Fixed costs (including semi variable) are £5000 per week.

Calculate

a) The break-even point in number of covers and sales volume for the

bistro. (9 marks)

b) How much profit is made if 1200 meals are sold each week? (2 marks)

c) The maximum profit that could be made each week. (2 marks)

d) How many covers must be sold to achieve net profit of £800 per week. (2 marks) e) \X'hat would be the breakeven point if the food cost was 45%

(5 marJ~s)

B3.

a) Give four main reasons for keeping accoun ts.

(4 marks)

b) Describe six purposes of budgeting.

(6 mares}

c) Explain the differences between Master and Departmental budgets and Fixed and Flexible

budgets giving examples. (6 mar/es)

d) Explain why calculating the cost of labour can be difficult giving examples of the costs

that are part of the costs of labour. (4 marks)

©Copyright CTHeM. 2004

5

ADHM 231: Management Accounting - Examination =September 2004

I
NOlO
. CATERING I
ENT I
I
I'
,
1
fitable or ,
smg extra "
j
(4 marks) i
(6 marks)
(6 mares}
ve ,
(4 marks)
I
I
options
ft
00
00
°
° I
°
° I
°
°
,
I
~!
i
,1,1
I'
II
i
,
~
"
6
1
I
I
'~
J "
L
, CON~t.l1k'..R!\!IO

TOURISM' HOTEL

MANAGEM

-----------------------_. __ --------------

B4.

Capital investment

Before <lny capital investment takes place a firm has to decide if the proposal will be pro not. The following information refers to two different options for an airline purchas aircraft. Assess these two projects US111g each of the three methods listed.

a) Lifetime cash surplus method

b) Accounting rate of return

c) Discounted cash flow method with a 10% interest rate

Decide whether or not you would advise going ahead with either of the proposals, and gi reasons for your answer.

An airline needs to expand and is considering two options;

1) Purchase two aircraft of the same type for £8 million each

2) Purchase one larger aircraft for £12 million

The following information has only been produced. It does not include depreciation; both are expected to have a residual value of £3 million.

-2,000

Two aircraft £OOO's

One aircra £OOO's

Ini rial au tlav

- 16,000

-12,0

Year 0

Extra sales revenue

7,000

4,0

Year 1

Additional ex enses

-2,000

-2,00

Extra sales revenue

7,000

10,00

Year 2

Additional ex enses

-2,000

-2,00

Extra sales revenue

6,000

5,00

Year 3

Additional ex enses

-3,000

-5,00

Extra sales revenue

8,000

7,00

Year 4

Additional ex enses

-2,000

©Copynght CTHeM, 2004

I

AD liM 231: Management Accounting - Examination -Septernber 2004

CON !'¥.D a» ,1.1 (O~ r.)f'

i1DtmI

TOURISM· HOTEL· CA:rERING

MAN;\GEME.:--.'T

--------------------------------------------------------------------------

II

Using standard accounting ratios and percentages comment on the following accounts for the Miramar Hotel.

Sales

Opening stock Purchases

Quarter ended March 31"

11000

Quarter ended June 30,h

10000

500 3500 4000

600 3500 4100

Closing stock 600 650
Cost of sales 3400 3400 3450 3450
Gross profit 7600 6550
\X'ages 2500 2700
Net margin 5100 3850
Overheads 2300 2500
Net profit 2800 1,)5Q Balance Sheets
As at March 31st As atJune30'h
Cost Depn Value Cost Depn Value
Fixed Assets
Premises 11000 11000 10000 10000
Furn.& equip 2500 300 2200 4000 400
3600
13500 300 13200 14000 400 13600
Current assets
Stocks 600 900
Debtors 300 700
Bank 400 700
1300 1300 1750 2300
Less current liabilities
Creditors 500 550
Overdraft Q Q
500 500 550 550
800 800 1750 1750
14000 15350
Represented by:
Capital 12000 14000
Net profit 2000 1350
14000 14000 15350 15350 ©Copynght CTHCM. 2004

7

CONFEDERATION Of

~ .. Inl" e\1 1 •• IIII~.

TOURISM· HOTEL· CATERING MANAGEMENT

J 18- 120 Great Titchfield Street, London, WI W 6SS

Time .Allosed:

3 hours

EXAMINATION


Sut:/ect:


August 2005

I nstructions:

You are allowed TEN MINUTES to read through this examination paper before the commencement of the examination. Please read the questions carefully, paying particular attention to the marks allocated to each question or pan of a question, and taking account of any special instructions or requirements laid down in any of the questions.

This Examination Paper contains TWO SECTIONS. All questions in Section A must be answered. Answer any THREE questions in Section B.

On completion ofyotlr examination:


Marks .Allocation


,eCopyright CTIlCM 2004

TOURISM· HOTEL· CATER.ING

ADTM 211: Management Accounting - Examiuatiou=-August 2005

MANAGEMENT

SECTION A

AflJwer all questions in thi.r section. Tbis section carries a total of 40 mares.

David and Wendy Brooks own a garage and coach company that has provided them with a good income for a number of yeats. Their son Paul, who bas a licence to drive coaches, has just finished his course in tourism management, which included periods of work experience for coach tour organisers. He wants to start up and mn Paul's Tours. The garage has some outbuildings that are currently not being used which David and \\'iendy will let Paul use rent free, (free of charge), and he can also use the workshops and equipment as he needs to. David and Wendy have also decided to provide £17,000 as start-up capital and act as guarantors for a £20,00016% loan from the bank. This was taken out on the day the firm started business; August 1" 2004.

On July 31" 2005 Paul produced the following accounts.

Receipts r £
L
Capital 17,000
Coach Tour sales 25,720
Other sales 10,806
Bank Loan (14%) 20,000 73,5261

Payments
Electricity 2,bO
Paul's wages 10,000
Printing of brochures 2,500
Decorating the office 1,600
Computer equipment 5,450
Telephone 2,500
Use of coaches 6,000
Drivers wages 3,500
Advertising and marketing 1,685
Wages for couriers 5,400
Fuel 5,000 I
Buildings and land insurance 240
Sundry expenses 1,400
Interest 2,000 !
Equipment rental 500
Maintenance 520 50445 I
Bank balance on 31" july equals net profit 23,081 CCopynght CTHCM, 2005

2

TOURISM' HOTEL· CATERING

ADTi'l'I 211; Management Accounting - Exam illation -A ugu5t 2005

MANAGEMENT

Paul knows he is not very good at accounts and so asks you for some help and advice, In discussion with him you discover the following:

1. The electricity meter was last read on 15th June 2005.

2. There are the following unpaid bills:

Printing £240

Telephone £600

3. The following stock was counted on July 31" 2005:

Brochures £550

Diesel fuel £630

4. The insurance on buildings and equipment was paid for the year ending 30,I! September 2005.

5. During the year Paul used materials and parts from his parents' business. No invoice was issued but he estimates the value as being £2,500.

6. Paul produces a copy of an unpaid invoice for £750 dated July 24th 2005 that has not been entered in the books.

7. The equipment Paul rented was from 1 st December 2004 and he paid one year in advance.

8. There is an invoice from 26th October 2004 for £850 still owing. Paul thinks the customer has gone abroad and cannot trace her.

9. Paul owes staff £150 in driver's wages and £90 in courier's wages.

Section A - Questions

a) You have to produce ~ corrected set of {ina! accounts for: Paul's Tours. (30 mark.!)

b) Using standard ratios and percentages, as well as your own experience, comment on this business. In particular do you consider it to be a worthwhile venture or not, and is there any advice you could give to Paul for the future

running of the firm? (10 marks)

<CCopynghr CmCM. 2005 3

1 OURISM - HOTEL - CATERING

ADTM 211: Management Accounting - Examination -Auaust 2005

- .-._-_- -~- ----------------

Al1swer Cltty ,1 questions in this section. Each question carries a tota! 0/20 mares.

SECTION B

Bl.

M,\N.\G£MEPT

Fixed assets form a major part of many firm's accounts. As they last for rnore than a year their cost needs to be written off over time.

a) Explain how this is carried out and give three clear examples, with

calculations to cover 3 years to illustrate your answer. (12 marks)

b) Using your own example explain how a fum will deal with the sale of a fixed asset. Show the ledger entries that would occur.

(8 marks)

B2

Standard costing is used by a number of firms who sell standard products From the following information produce a budget, show the actual results and calculate the variances. Comment on the variances you have found.

The BB Burger, is a 250g burger served in a bun, with a cooking time of 3mins. The standard costs and sales arc;

Standard wage rate Standard power cost Standard cost 0 f ingredients Standard burger sales Standard fixed costs

Actual sales and costs were:

Wage rate Power cost

Cost of ingredients Burger sales

Fi..'l:ed'· costs

£3.00 per hour £1.20 per hour

Bun £0.05 Burger £0.16 6,000 units at £0.80 per week £2,000 per week

£3.50 per hour £1.00 per hour

Bun £0.06 Burger £0.15 8,000 units at £0.70 per week £1 ,800 per week

a) Produce both a standard operating statement and an actual operating statement,

flex the actual results to standard and show the variances. (15 marks)

b) Comment on the variances.

<DCopyright CTHCM. 2005

4

APTM ZU: Management Accounting - Examination -August 2005

~ntml

'I OURISM· HOTEL· CATER1NC; MANAGE~....tENT

B3.

Harlequins Rugby Club has been relegated to the second division Its crowds have been declining seriously and the players have become de-motivated; the fans are angry and the clubs bank account is overdrawn by £80,000, The chairman called an emergency hoard meeting immediately after the end of the season. He opened the meeting Eke this: c This proud club is now at a crossroads. \V'e can, as a club, muddle on as we are, unrealistically hoping to get promoted next year while risking foreclosure by the bank, who as you know, are sharpening their knives for us. We can, on the other hand, stop the rot and make a stand by doing something positive to ensure a bright future for ourselves, the players and above all the fans. I hope you agree that the former option is as good as committing suicide, and the seriousness of the situation requires immediate action In view of this I have the following plan, which I would like the board to consider and support".

IOCopyright CTHCM. 2005

5

The main elements of the chairman's plan were as follows;

1. Immediately to sell their star player, Gary Rucker for £100,000, which as a single player transaction would see a reduction in their gates of 15% from the start 0 f the new season, as compared to the previous season.

2. To buy Barry Winger for £180,000 from a competing club in readiness for the 5thhome game of the new season and the start of the Cup competition. This would increase gates on average by 35% over the level of attendance achieved in the first four home games foUowing the departure 0 f Rucker during the do sed season.

3. During the closed season to build a family enclosure at a cost of £25,000, but this is expected to bring in £8,000 of extra gate receipts for each home game.

4. To refurbish and re-stock the supporter's shop and club at a cost of £25,500. This is expected to increase the net income from the club by 30% over the following season.

5. To sack the present manager and give the job to the club coach, which would save the club half the old manager's salary over a whole season.

Other facts;

1. Average gate receipts for the previous season were £40,000 for every home game. There is an average of 22 home games in the season, comprised of 18 league games and 4 Cup games.

2. The players' wages last season were £25,000 per week for 40 weeks in a season. Of this amount Rucker's wages were£5,OOO a week. Winger's wages will be £3,000 a week when he joins the club in the eighth week.

3. AU other players' wages will remain the same.

4. The old manager's salary was £3,000 a week.

5. Net cash income from the supporters club and shop was £2,500 a week during the season.

6. There are establishment costs of £2,000 a week to cover rent, rates training ground costs and ground staff wages. These are paid each week of the 40-week season. The policing bill per home game is estimated at £1,000 per game.

--------~--~---.-.-.-.-.

TOUI! ISM· I IOTEl· CATERING

ADTM 21L Management Accounting - Examination -August 2005

,\'1A~AGEMENT

Question:

Evaluate the chairman's five- point plan. How much will Harlequins Rugby Cluh have in their bank account at the end of the new season if everything turns out as expected? Demonstrate this by preparing a single column cash budget for the new season. Show your workings in full, clearly explaining the origin of all receipts and payments expected in the new season.

(20 marks)

B4.

Banji's Restaurant

Banji's Restaurant serves up to 800 meals perweek; the ASP is £55.00, with a sales mix of 60% food and 40% liquor. The food gross profit is 60% and the liquor eross profit is 54%. Other variable costs are £2.50 per lead. Fixed costs are £1 0,500 per week. Fuel, phone

and gas have a total fixed cost of £230 a week plus ££0l per cover. ~c\("_ \ t.S"O-t" ('tO~ 'l._CO

S:~ - uo._r,ckk f~wd. I~ .. 1:~ ~ ,(,,?,~o

a) Calculate the break-even point in number of covers and sales volume for

the restaurant. (9 marks)

b) How much profit is made if 500 meals are sold each week?

(2 marks)

c) What is the maximum profit that could be made each week?

(2 marks)

d) How many covers must be sold to achieve net profit of £2000 per week? (2 mares]

e) Wbat would be the breakeven point if the food cost was 45%?

(5 marks)

B5.

a) Give four main reasons for keeping accounts.

(4 marks]

b) \X!hy do firms allow for depreciation in their accounts?

c) \Vby do firms create a provision for bad debts?

d) \'(!hat is a pre-paid expense, and how is it accounted for at the end of the financial year? Give an example of a typical pre-paid expense.

(2 marks]

e) Describe four of the purposes of budgeting.

(8 marks)

rOCopyright crnCM. 2005

6

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s'S,OCO >< CONFEDERATION OF

~n· 1111

.'11. ~I I In II •• :

TOURISM· HOTEL· CATERING MAN AG Elvf ENT

1 J 8-120 Great Titchficld Street, London, WI W 6SS

EXAMINATION

CfHCM Advanced Diploma in Tourism Management

Subject:


Series:

August 2006

Time .Alloued:

3 hours

Instructions:

You are allowed TEN MINUTES to read through this examination paper before the commencement of the examination. Please read the questions carefully, paying particular attention to the marks allocated to each question or part of a question, and taking account of any special instructions or requirements laid down in any of the questions.

This Examination Paper contains TWO SECTIONS. All questions in Section A must be answered. Answer any THREE questions in Section B.

On completion of your examination:

Make sure that your name, CIHCM membership number, and centre number are clearly marked on each answer sheet and any other material you hand in.

Marks Allocation

Sec tion A = 40% of the module grade Section B = 60% of the module grade


CONHDERAT!O'N or

TOURISM· HOTEL· CiUERING

ADTM 211: Management Accounting Examination - August 2006

MANAGEMENT

SECfION A - Case Study

George operates a 70 seat restaurant in the Kensington area of London. The restaurant is open 365 days per year. He wants to have his restaurant's P&L account prepared using the contribution margin format. In the year ended 31 December 2005, the restaurant had an average seat turnover of 1.2 times. Variable food and drink costs averaged £6 per cover. In orderto provide further incentives to his staff, George decided last year that for the year ending Dec. 2005 the kitchen staff will be receiving a bonus of £ 1 per cover sold. The waiting staff will also be receiving a bonus of £0.20 per cover sold.

All the restaurant's remaining costs can be viewed as fixed. Below is the restaurant's profit and loss account presented in conventional format for the year ended 31 December 200S.

Curtains Up Restaurant

Profit & Loss Account for the year ended 31 December 2005 Conventional format

£
Sales 459,900
Less cost of sales 183,960
Gross Profit 275,940
Less expenses
Salaries & wages 135,000
Marketing expenses 10,000
Rent 35,000
Maintenance 5,000
Other 12,000
Total operating expenses 197,000
Net Profit 78,940 ©Copyright CTHCM 2006

2

CONHDERATION or

TOURISM, HOTEl .. ' CATERING

ADTM 211: Management Accounring Examination - August 2()()6

MANAGEMENT

SE err ON A - Ques tions

Required:

a) How many covers has the restaurant sold in the year ended 31S[ December 2005? (-I »rares)

b1\\X!hat is the average spend? (2 marks)

~VUSing the contribution margin format, prepare the restaurant's P&L account

for the year ended 31 December 2005. (10 marks)

d) Wb.at is the restaurant's current break-even point (in covers)? (4 marks)

e) If the volume of sales were to increase by 10%, by how much would the

restaurant's profit increase? (4 marks)

f) If revenue next year reached £ 600,000, what would the restaurant's profit be? «I marks)

~-\XlIat is the % safety margin. Also how many covers represent the

Vafety margin when the profit is £78,940? (4 marks)

h) Assume that the total variable costs increase by 10%. How many additional

covers are needed to maintain the current net profit level of £78,940? (4 marks)

i) George wants to lower the break-even point of his restaurant. Give him your

advice to achieve a lower break-even point.' (4 marks)

©Copyright CTHCM 2006 3

CONfEDI!R.AT10N or



MANAGEMENT

SEcnONB

Answer any J.. questions in this section. Each question carries a total of20 marks.

Bl.

Based on the following information, produce a cash budget for the six months ended 30 June 2005.

Balance sheet as at 31 December 2004
£ £ £
Fixed assets 15Q,OOq
Premises " \'J V
Equipment 20,000
Less depreciation 14,000 6,000
iJJ bc<>L \;~ 56,000
Current assets
Stock 5,500
Debtors 11,000
Cash at bank 4.750 21,250

Current liabilities
Creditors 9,000

Net assets 68,250

Financed by:
Capital 50,000
Add net profit 25,000
75,000
Les s Drawings 6250
V 68,250 1
\_ Additional infonnation:

1. Sales and purcha:es are all on credit - withene month's credit being allowedfYus and by our suppliers.

2. Expected sales and purchases are as follows:

Feb

Mar

an

15,000

24,000

29,000

36,000

12,000

18,000

20,000

35,000

3. The owner takes personal cash drawings each month of£500

-.......___-


(20 marks)

un

4

CONftDER.>\TION or:

TOURISM' HOTEL, CATERING


Wages and salaries amount to £2,400 each month Insurance of £ 100 is paid each month

Overheads are £300 per month and are paid when due.

New equipment is purchased on March 'J 05 for 6,000 " Equipment is to be depreciated at 10t:x on cos - .. Oo(!/ /. Rent is received of £ 400 each quarter on' anuary and 1 April, Stock in trade on 30 June 2005 was valued at £ 5 ,700 ~ fi_ml e

4. 5. 6. 7. 8. 9. 10.

(c_ e ,L 10. J- ~CV~~)

,j c J "'~ l< 'L ; \- }"v i>, j)

Cash budget for six months ended 30 June 2005

Jan Feb Mar Apr May Jun
£ £ £ £ £ £
Cash inflows

Cash outflows

Net cash flow B2.

Based on the information in question Bl, produce a forecast trading and profit and loss account for the six months to 30 June 2005 and a forecast balance sheet

as at 30 June 2005. (20 marks)

©Copyright CTHCM 2006 5

CONHDI:R.-,TION or

TOURISM· HOTEL' CATERING


B3.

MANAGEMENT

The following information relates to a family owned restaurant in Majorca,

Manager's salary Interest

Depreciation

License Insurance Maintenance Other salaries Variable costs

Before tax operating profit target

Required:

€40,000

Loan of €100,000 is outstanding 6% annual interest rate

Equipment and furniture with book value

of €120,000 is being depreciated at 25% of BV €4,000 p.a.

€6,000 p.a.

€4,000 p.a.

€48,000 p.a.

60% of revenue

50% of owner's investment of €120,000

a) What sales revenue does the restaurant have to achieve in order to make its target profit?

(10 mares)

b) TIle restaurant is closed for four weeks each year. The remainder of the year i.e. 48 'weeks, it opens every day except Mondays. TIle restaurant has 45 seats and averages a seat turnover of twice a day in the week and three times per day

on Saturdays and Sunday'S. What must the average cover price be in order

to achieve the target profit level?

(10 marks)


6

a) The Trading and Profit and Loss Account

b) The Balance Sheet.

(20 marks)

-

-

CONfEDERATlON or:

TOURISM· HOTFJ,'CATERING


MANACFMfNT

------------~------_---------~----_---

B4.

From the folio-wing trial balance of the Leicester Hotel you are required to produce;

Leicester Hotel: Trial balance as at 3rt December 2005

I

- .

Dr Cr
Capital 480,000
1'".:' Bank loan ~. ,~ 150,000
Freehold premises -~---- ,;.;: 470,000 )
, <,., Equipment 120,000
~. _-,-
" Furniture and fittings 105,000
Food stock 9,900
Liquor stock 23,200
Food _purchases . " ' . . 245,300
Food sales 712,500
Liquor purchases 170,500 ,
Liquor sales 338,200
Insurance _ .. ~ .~ 12,200 , "
_.~' .'_' . .<' ... ~~, ~".-." "
Administration expenses 15,900
Creditors '----~----- .. -.._..,..-."".-, .. ~,,,.,.~ .. , .... ~ .. ~--- .... ~.~,,-':''': .. ... ,-"_-'_,,. _,ON _ ,,,- 41';000
Sundry expenses .'~ ,'~' . ,," ~." .. , .... 82,000
Debtors 3,700 r---"-"".' ~""'_"'~'" ",. '.
Repairs and maintenance .,,,'''''''''''' .' '".,,~, 16,000
Drawings - '" . ~ .. , .. '~' .. ';", ... '-~. " .,., .; .. '., .. ,", ...• _. 92,500
Bank 60,700
Wages ~~~~~.~~:,..,i·~f#-)'S!.'iI1WII .. 1~~~~-, ~:7~''!~'1hUlW'''',2 46,000
Gas and' electricity 48,800
1,721,700 1,721,700 ........ : .

Notes

1. Food stock on 3 rt December 2005 is £ 10,200

2. Liquor stock on 31st December 2005 is £ 24,700

3. Depreciate premises by £25,000

4. Depreciate equipment and furniture by 10% S. Create a provision for bad debts of 10%

6. £ 1,500 insurance is pre-paid

7. Gas and electricity accruals are £2,100


7


8

CONfEDERAT10N or:

iVion

TOURISM' HOTEL - CATERING


MANAGEMENT

B5.

a) The Gellert Hotel in Budapest has one of the most well known spas in Central Europe. Its Maintenance Manager is thinking of upgrading the spa's air-conditio~g system .Inv~stment in the new systel~l will b~~200,OOS- and it ha~ been estlmated; that It will save the .hote~ electncltyana maintenance costs in each of the next five years .

.....:_____:

The investment would be depreciated at the rate of €40,OOQ_per year and have no salva e value at the end of its 5 ar life. The hotel has a 10% cost of

caprt an operates m ,tax haven.

The maintenance manager has asked for your help with regard to a number of investment appraisal techniques i.e. ARR, Payback Period and NPY. Advise him.

(10 marks)

b) Explain to the Maintenance Manager the advantages and disadvantages of the

Payback method and the Net Present Value method. (10 mares)

08106 Introduction 10 Financial Accounting

~d

Topic 8 - Accounting Ratios - Principle and Practices ~. ( (N:

f<1..<:.. A / /Q.l.,_

Topic 8 Accounting Ratios - Principle and Practices

International Diploma in Business

August 2005 - August 2006

8.1 Introduction ,. 2

8.2 Sources of Information Used for Comparison 2

8.3 Limitation of Ratio Analysis Comparison 2

8.4 Uses of Financial Ratio Analysis 3

8.5 Classification of Accounting Ratios 4

8.6 Liquidity Ratios 4

8.7 Profitability Ratios .4

8.8 Efficiency Ratios 4

8.9 Investment Ratios 5

8.10 Financial Ratio 5

8.11 Exercise - Interpretation of Accounts/Financial Analysis

(Accounting Ratios) 6

8.12 Exercise 6

Copyright 1995 by Thames Management Centre International. All rights reserved.

TopIC 8 - Accountmq Ratios - Principle and Practices

08106 Introduction to Financial Accounting

8.1 Introduction

Oata alone shown in the financial statement does not provide meaningful information on the company's financial health. However, if a relationship is established between related data, meaningful information can be obtained to show the company's financial strengths and weaknesses.

Ratio analysis of a company's financial statements is a process of calculating relationships between amounts within a single set of' financial statements. Relating financial statement items to each other within a single time period is called vertical analysis. This is useful for seeing how significant the components of a statement are.


2


The financial ratio calculated is compared over several periods with a base year to show the trend. A base year is any year chosen as a beginning point. This horizontal analysis makes it possible to focus attention on items that have changed significantly during the period. It provides a means for alerting the analyst to Significant shifts that require further attention.

8.2 Sources of Information Used for Comparison

• Company's past years financial statements and forecast of results.

• Information from credit agencies on other companies in the same industries.

• Information from trade association on the industry's average

figures.

Notes to the financial statements also provide additional information that may greatly influence one's judgement about the future potential of the company.

8.3 Limitation of Ratio Analysis Comparison

A major limitation of comparing amounts and ratios for a single company is that there is no basis for a decision about the significance of these statistics. ,6.n external standard is needed against which to measure the company's ratios. For example, if the industry average is 15, a turnover of 10 may be a cause of concern.

In most industries comparability will be affected by size. Larger companies will be able to make use of economies of scales and sophisticated quantitative management techniques that may not be practical for smaller ones. However, smaller companies may be able to maintain closer client relations than larger ones. These

· ' ft'

DB106 Introduction to Financial Accounting

Topic 8 - Accounting Ratios - Principle and Practices

differences in operating techniques may influence different ratios in different ways. For example, larger companies may be expected to have a higher gross profit percentage and inventory turnover, while smaller ones may have a quicker debtor turnover and a lower percentage spent on advertising.

The difference in accounting methods used to generate financial information may also influence the comparability of ratios and other statistics. Companies may employ different inventory techniques, depreciation methods, estimates of useful lives and revenue recognition procedures. Adjusting the financial information to compensate for differences in accounting methods may prove to be difficult, if not impossible.

Due care has to be exercised in the selection of ratios used in the interpretation and analysis of these statements to ensure that the specific needs of the user are determined in the first instance, before particular ratios are calculated. For example, a shareholder will be interested in the return on capital, earnings and solvency ratios while the sales director will be more concerned with sales ratios and selling ratio.

It must be appreciated that very often conclusions drawn from examination of the ratios are subject to certain assumptions which have had to be made since a number of factors used in the compilation of the ratios may not be known. Consequently, before final conclusions are arrived at from ratio analysis it is advisable whenever possible to have the results corroborated with any other available information prior to regarding the results as positive,

8.4 Uses of Financial Ratio Analysis

It assists management to measure a company's operating efficiency. For example, are investments in fixed assets excessive? Is the company's credit control strong? The trends established from the horizontal analysis are useful in assisting management to forecast and plan its future operation. For example, the trend may reveal that gross profit has not increased nearly as rapidly as sales, indicating that the cost of inventory may have been increasing more quickly than the sale price, This will highlight to management further action required in the future to arrest the increase in cost.

It is also useful to investors in the determination of a company's dividend policy. Comparison of the company's results with those of other businesses in the same industry may reveal contrasts and may provide information as to whether these can be accounted for by differences in advertising policies or by economies of scale.

Ratio information about other companies is used as a yardstick against which to compare the company's operating performance.

International Diploma In Business

3


Topic 8 - Accounting Ratios - Principle and Practices DB106 Introdurtion 10 Financial Accounting

----------------------------------

8.5 Classification of Accounting Ratios Accounting ratios may be classified as follows.

• Liquidity ratios.
• Profitability ratios.
• Efficiency ratios.
• Investment ratios. 8.6 Li~atios

The liquidity ratios measure the company's abilities to pay its debts as they fall due. The following ratios provide an indication of the company's liquidity position.

• Current ratio. ( .... ,',"-, c,'krt r .... \\o\

• Quick Asset ratio,

8.7

profit~i-litY Ratios

These ratios may be classified as follows:


4


• Ratios that measure the returns on the company's sales:

• gross profit margin;

• net profit margin.

• Ratios that measure the returns on the company's capital employed:

• return on shareholder's fund;

• return on equity fund.

8.8 Efficiency Ratios o.: c(}c;-..,~,J £,U'Q c&rC(

These ratios measure the management's abilities to control the resources efficiently and effectively,

• Stock turnover.

• Debtors turnover,

• Creditors turnover.

• Fixed asset to sales ratios.


Topic 8 .... Accounting Ratios - Principle and Practices

8.9 Investment Ratios

These ratios are useful to users of financial statements in making investment decisions.

• Earning per share.
• Price earning ratio.
• Gearing.
• Dividend yield.
• Dividend cover. 8.10 Financial Ratio

1. Gross Profit Margin (GPM)

Gross Profit X 100
Net Sales
. 0IIaa~ X 100
OHIoI'AIH
~ PtoI:t ~~I. X 100
~s.a • M5t PI'orlIt ~ -= In's fn!'Iao at

dtt!!i!Im

.l 100

9. 10.

~~~ • A\'IQM9"edIn X Qd~

Ovc ct...) ~~.eQd

....... ,.. .. DlflWR!nr p;I'!f!y:t'ifNU

IiII!IdS pri=e per ~,3IVft

11 QMCm(IOlIWIS' .. lIS fIQB Aa!:lfC -~4 ~

0'cIrW'f SIwe [)Mderd

11.

11.

111. E~ per~ *!'rpt4Jde! Tox-«I$!!lIAotmyJd

I'obriIoef of cnhrt lII'IIn!s

15 Pn;-e Earning R3tkl • tmd;et Prict' per ~ stws

Earnlg per Shre

F1:I:I!d ~ c.rmgtem-- ~.sb!'!mO 0rdInIIIy !hires .. ReArvee

100

( t-.~

2.0 \ I'~C>~ I,!~~

.. ,: .

...

.,; .

. "" : ~.~ '; .........

.' ,


5


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.-\-<-.. oAv.(j..

.- ......


DB 106 Introduction to Financial Accounting

8.11 Exercise - Interpretation of Accounts/Financial Analysis (Accounting Ratios)

The following are the accounts of a company in summary form for the year ended 31 Dec 1995.

Required:

1. Calculate the following ratios for the year ended 31 Dec '1995:

a. Gross Profit Margin

b. Net Profit Percentage

c. Rate of stock turnover

d. Working capital ratio

e. Acid test ratio

f. Debtors turnover

g. Average credit period taken

h. Return on total assets employed i. Return on equity interest

The comparative ratios for the year ended 31 Dec 1994 are:

8.12 Exercise Question 1

List two ratios used to measure a company's liquidity position and show how the ratios are calculated.


6




Question 2

List two ratios used to measure the return on the company's sales and show how the ratios are calculated.

Question 3

Using the following information, calculate the company's debtor's turnover and briefly explain the ratios you have calculated.

Year 1

Year2

Sales - cash Sales - credit Debtors

20,000 300,000 50,000

30,000 400,000 50,000

Question 4

Using the following information, calculate the company's stock turnover and briefly explain the ratios you have calculated.

Year3

Year4

Opening stock Closing stock Purchases

25,000 80,000 700,000

15,000 25,000 460,000

Question 5

Using the information below, you are required to calculate the following:

a. Working capital.

b. Working capital ratio.

c. Acid test ratio.

Stock Debtors

Bank and cash balances Creditors

Year8 $ 40,000 10,000 5,000 20,000

Year 9 $ 50,000 12,000 3,000 40,000


7


Sales

Opening stock Purchases

Closing stock Operating expenses Shareholders' fund

Year 1 $

150,000 20,000 80,000 30,000 40,000

300,000

Year 2 $ 250,000 ?

'130,000 50,000 80,000 300,000


08106 Introduction \0 Financial Accounting

Question 6

Using the information below, calculate the following ratios:

a. Gross profit margin

b. Net profit margin

c. Return on shareholders' fund


8




Question 7

Calculate and explain the following ratios using the information given below:

a. Earning per share.

b. Price earning ratio.

c. Gearing.

Balance Sheet As At 31 December 2001

Ordinary share capital

10% preference share capital Retained profit

10% Debenture

Capital employed

Earn $ 250,000

50,000

300,000

Represented by:

Assets

300,000 300,000

Additional information:

Price Gear

$ $

150,000 100,000 100,000 150,000 50,000 50,000 ___ - 50,000 300,000 300,000

300,000 350,000 300,000 350,000

1. The operating profits before interest and tax for the year to 31 December 2001 amounted to $150,000 for each company.

2. The Corporation tax for the year for each company is as follows:

a. Earn 45,000

b. Price 45,000

c. Gear 42,000

3. An ordinary dividend of 10p for the year is proposed by all companies.

4. The market price for the share of each company is as follows:

a. Earn $2

b. Price $3

c. Gear $5


9



10



--~----------------------------------------


Question 8

Calculate and explain the following ratios using the information given below:

a. Earning per share

b. Price earning ratio

c. Gearing

Balance Sheets as at 31 December 2002

Yarn Fry Lear
$ $ $
Ordinary share capital 750,000 450,000 300,000
10% preference share capital 300,000 450,000
Retained profit 150,000 150,000 150,000
10% debenture 150,000
Capital employed 900,000 900,000 1 ,050,000
Represented by:
Assets 900,000 900,000 1,050,000
900,000 900,000 1,050,000 Additional information:

1. The operating profits before interest and tax for the year to 31 December 2002 amounted to $550,000 for each company.

2. The Corporation tax for the year for each company is as follows:

a. Yarn 120,000

b. Fry 120,000

c. Lear 140,000

3. An ordinary dividend of 15p for the year is proposed by all companies.

4. The market price for the share of each company is as follows:

a. Yarn $3

b. Fry $4

c. Lear $6

TOURISM' HOTEL' CATERING Ivl.ANAGEMENT

118-120 Great Titchfield Street, London, W 1 W 6SS

. __ .- -- ._--------------

EXAMINATION

CTHCM Advanced Diploma in Hotel Management

Subject:


Series:

June 2004

Time Aliowed:

3 hours

1m-fmctions:

You are allowed TEN MINUTES to read through rhis examination paper before the commencement of U1e examination. Please read the questions carefully, paying particular attention to the marks allocated to each question or part of a question, and taking account of any special

instructions or requirements laid down in any of the questions.



On completion of your examination:


Marks Allocation



CONFf.DEfI,ATION OF


ADHM :231: Management Accounting - Examination =June 2004

MAN.A,.r_;LMt.:NT

-------------------------~-----------------

SECTION A

AnJuJer all questions in this section. This Julian carries a total of40 morkJ

AI. What is found by taki.ng the direct variable cost ret unit from the selling pnce of an item?

(2 markJ)

A2. What is the difference between the break-even point and the maximum sales of an

operation called? (2 marks)

A3.

Why may items be re-valued at the end of the accounting period?

(2 modes)

Give an example of when a business will show goodwill in its accounts.

A4.

AS. Name the two external factors that are considered when considering the ROCE of a firm

and explain why. (2 marks)

A6. A firm's vertical balance sheet has a balance figure of £59,000. What will it be after the following transactions? £4,500 spent on insurance; stock bought on credit for £2,500;

commission earned £600. (2 marks)

A 7. If the gross profit a firm made was less than expected what would you investigate to

discover the reasons for this. Give reasons for your answer (2 markJ)

A8.

If the sales in the restaurant went down would the hotel's fuel bills go down in proportion? Explain your answer.

A9. If the variable costs in a travel agency were £5500 a week when 350 holidays were sold

what would the variable costs be if 500 holidays were sold? (2 mares)

AIO. From the following list of accounts calculate the net profit of the firm.

Insurance

(2 mares)
250 Sales 14,000
3500 Creditors [570
560 Rent 1000
{2,450 Cost of sales 7,000
-950 Premises £25,000
{670 Fuel 800 Debtors

AI1. W'hat items would normally be found in the Appropriation Account of a limited company? (4 mares)

©CQPyright CTHCM, :004

:2

CONFf.of,IlATH.l~ Of

TOURISM' HOTEL' CATER INC

MANACEMEN-r

ADHM 23 t: Management Accounting - Examination ~June 2004

------------------------------ --_ ..

SECTION B

Answer an_Y:2 questions in this section. Each question carries a total rif20 marks.

B1.

Oaks Restaurant

From the following trial balance and further information given produce the trading and profit & loss account and balance sheet for the Oaks Restaurant.

Trial balance as at December 31st 2002

Capital Bank loan

Food purchases and sales Liquor purchases and sales

Rates

Premises

Admin expenses Debtors and creditors Furniture

Equipment

Food stock

Liquor stock Insurance

Salaries

Bank loan interest

China Cutlery and Glass Gas and electricity Repairs and maintenance Cash in hand

Cash at bank

Debit Credit

150000 83000

30500 86750

15250 38250

4100

165000

2500

7000 5700

26000

30100

2100

2550 950 35450 4800 12700 17250 2050

325

5075~

1637QQ 3637QQ

Notes:

Food stock on December 31st £2200

Liquor stock on December 31st £3050 Rates pre-paid £825

Gas charges accrued £950

Create a provision for bad debts of 5% Depreciate furniture and equipment by 10% Revalue china cutlery and glass at £11050

(20 markj)

(i;lCopynght CTHCM. 2004

4

ADJ-IM 231: Management Accounting - Examination-June 2004

CONFEDERATION OF

~nl11ll

'TOURISM' HOTEL' CATERING M.'\NACEMF..l'lT

._-_._---

B2.

Pietro's Pizzeria

Pietro's Pizzeria serves up to 800 meals per week; the ASP IS £12.00, with a sales mi." of 68% food and 32% liquor. The food gross profit is 64% and the liquor gross profit is 58%. Other variable costs are £2.30 per head. Fixed costs (including semi-variable) are £2100 per week.

Calculate

a) The break-even point in number of covers and sales volume for the bistro.


c) The maximum profit that could be made each week.

d) How many covers must be sold to achieve net profit of £400 per week?

e) What would be the breakeven point if the food cost was 40%

(9 marks) (2 marks) (2 maries) (2 maries) (5 marks)

B3.

Fixed Assets

Write notes on the following aspects of fixed asset accounting. Use examples to explain your answer.

a)

Assets of a firm to which it is impossible to give accounting values.

(4 mares}

b)

Intangible Fixed Assets and Goodwill

(6 marks)

c)

Depreciation of Fixed Assets

(10 marks)

I\)Copyrlght CTHCM, 2004

5

CON Fr:.DERAT!UN OF

ADHM 231; Management Accounting - Examination -June 2004


MA~AGEMENT

--- --._. __ - ~ ----------_._---_._----

B4.

Capital Investment

Before any capital investment takes place a firm has to decide if the proposal will be profitable or not.

The information below refers to two different options for Apex Airlines who are considering purchasing extra aircraft to give it ereater carrying capacity.

Assess these two projects using each of the three methods listed.

a) b) c)

Lifetime cash surplus method Accounting rate of return

Discounted cash flow method with a 10% interest rate

(4 marks) (6 mares) (6 marks)

Decide whether or not you would advise going ahead with either of the proposals, and give

reasons for your answer. (4 marks)

Apex Airlines Investment Options

Apex Airlines is considering two options to meet its projected needs

1. Purchase two aircraft of the same type for £7 million each

2. Purchase one larger aircraft for £11 million

The following information has been produced. It does not include depreciation; both options are expected to have a residual value of £2 million

Two aircraft One aircraft

OOO's OOO's

Year °

[Initial outlay

-14,000

-11,000

Extra sales revenue

Year 1

6,000

3,000

Additional ex enses

-2,000

-2,000

Year 2

Extra sales revenue

7,000

11,000

Additional ex enses

-2,000

-2000

7,000

Year 3

Extra sales revenue

4,000

-3,000

Additional ex enses

-5,000

7,000

Extra sales revenue

Year 4

7,000

L-\dditional ex enses

-2,000

-2,000


6

,.

CONFfD!:..r<,AT!U:"J OF

ADHM 231: Management Accounting - Examination =June 2004

TOURISIvj· HOTH' CATERING

MANAGEMENT

------------------------------------_._-----_

B5.

Kingston Hotel

The tables show the budgeted cash flow and profit and loss account for the next three months for the Kingston HoteL Complete the tables using the information giv'en about the actual results,

(18 marks)

Comment on your answer (2 '.'1ark.~


Sales were £11,000 per month, of which 15% were on two months credit

Food and beverage costs were 41 % of sales, and one months credit is given on all purchases Stock levels remained the same


Overheads not including depreciation and interest are £1500 per month Depreciation is £65 a month

Loan interest is 16% a year paid half yearly in June and December Drawings were £1200 per month

Capital expenditure of .£5000 was paid in March

The table is shown overleaf

The completed table must be handed in with your workbook.

'(!';)C(lpynght CTHCM, 2004

7

cum £IJEMT!ON Of

ADHM 231: Management Accounting - Examination =Jun e 2004


MANA.GE,"'1ENT

NAME:

f CTHCM number

-j

CTHCM centre

~--------------~----------------~--------------------.-

YOU MUST HAND IN THESE COMPLETED SHEETS WITH YOUR ANSWER BOOK


Jan Feb March V' .,
Budget Actual Variance Bud_get,Actual Variance Budget Actual anance
Sales
Cash 9000 9000 9000
Credit (from debtors! 0 I 0 1000
Total 9000 9000 10000
I I
Food and Beverage creditors 1000 4000 4000
Overheads (creditors) 500 1500 1500
Labour 2000 2000 2000
Capital expenditure ! 4000
Drawings 1000 1000 1000
Total 4500 8500 12500
Balance 4500 500 -2500
Opening balance 1000 5500 6000
Closing balance 5500 - 6000 3500 The profit and loss account for three months

Budget Actual Variance

£ % £ % £ % £ % £ % £ %
Sales 30000 100.00 I
Cost of sales I 12000 40.00
IGross profit 18000 . 60.00
1 T
[Expenses
Labour 6000 20.001 I
Overheads -1-500 15.00 I I
Loan interest 120 0.40 I
De_l)_reciation 180 0.60 I I I
I I
10800 36.00 10800 36.00
I I I 72001 :aool
I
I I I (~Copynght CTHCM, 2004

8

4

CU:-JF£DtRATION OF

~nm

ml .1'''1

ADHM 231: Management Accounting - Exnmination -June 2004

TOURISM· HOTEl' CATERING MANAGEMENT

. 'ldCopyright CTHeM, 2004

9

CONFEDERATION OF

an ·PI,1i

11'1 ,


118-120 Great Titchfield Street, London, W 1 W 6SS

EXAMINATION

CTHCM Advanced Diploma in Hotel Management

Sulject:


Series:

January 2005

Time Allowed:

3 hours

Instructions:

You are allowed TEN MINUTES to read through this examination paper before the commencement of the examination. Please read the questions carefully, paying particular attention to the marks allocated to each question or part of a question, and taking account of any special instructions or requirements laid down in any of the questions.



On tompletion rfyour examination:


JV1arkJ Allocation



ADHM 231: Management Accounting - Examination - January 2()05

CONF£.DF;R.A,.TIUN OF

~ntml

TOURISM' HOTEL' CATERING MANA<;EMENT

SECTION A

/ll1suJcr all questions in ibis section. Tbis section carries a total of 40 mades

Define the term "semi-variable costs" and give two clear examples

AI.

(2 mares}

A2. \'(lhat would be included under the heading Direct Variable Costs for a take-away food

business? (2 mar.ks)

A3.

Does depreciation always show the true drop in value of an asset?

(2 marks)

A4.

\\i'hat is goodw-ill and where does it appear in the final accounts?

(2 marks)

A.S.

What is ROCE and why is it important?

(2 marks)

A6. A firm's vertical balance sheet has a Net Asset balance figure of £159,000. The following

items were omitted: Insurance accrued £3,000; Debtor £250. What is the correct fIgure? (2 marks)

A 7. If the gross profit percentage of a fum was satisfactory but the net margin percentage was less than expected what would you investigate to discover the reasons for this? Give

reasons for your answer (2 marks)

A8. If the current liabilities exceed the current assets what does this tell you? (2 mares}

A9. Explain the difference between Revenue Expenditure and Capital Expenditure. (2 mares)

AIO. Explain the Concept of Prudence. (2 marks)

All. How could the following transaction be recorded in the ledger? A firm purchases a coach for £30,000 part exchanging a van valued at £5,000 and writing a cheque for

£25,000. (4 marks)

A12. What assets of a fum is it impossible to value, which is why they do not appear in the

firm's accounts. (4 marks)

1)CQPyright CTHeM, 2005

2

CONH1)f.\I,\1ION Of

TOURISM ·IIOTEL· CATERING

ADHM 231; Management Accounting - Examination - January 200S

MANAGEMENT

------~.-----.-. -

AU. Explain how you would depreciate the followin£;;

a) Furniture

b) Computing equipment

A 14. Explain the advantages and disadv:mtages of expansion by

a) Borrowing money

b) Selling shares

(4 marks)

A15. Explain the relationship between equity, liabilities and assets. What are the four

ways equity can change? (4 marks)

(CCopyright CTHCM, 2005

3

COt..:HnfIV,1"\UN OF-

mnfllll

TOURISM' HOTEL· CATER lNG MANAGEMENT

AOHM 231: Management Accounting - Examination - January 2005

SECTION B

.Ansner aJ!Y ~ questions in this section. Each question carries a total ~(20 marks.

B1.

Earl of Derby Restaurant

From the following trial balance and further information given produce the Trading and Profit and Loss Account and Balance Sheet for the Earl of Derby Restaurant.

Trial balance as at December 31st 2004

Capital

Bank loan

Food purchases Food sales Liquor purchases Liquor sales Rates

Premises

Admin expenses Creditors Debtors Furniture Equipment Food stock Liquor stock Insurance Salaries

Bank loan interest

China Cutlery and Glass Gas and electricity, Repairs and maintenance Cash in hand

Cash at bank

Notes:

Food stock on December 31 st £2200 Liquor stock on December 31 sr £3050 Rates pre-paid D,OOO

Gas charges accrued £250

Create a provision for bad debts of 5% Depreciate furniture and equipment by 10% Revalue china cutlery and glass at £41,500

-352,000

-100,000

30,500 -125,000 15,250 -55,000 12,000 256,000 3,500 -1,200 6,500 65,000

155,000 2,100 2,550 5,800 7,800 5,000

55,000 4,600 2,500 1,800 2,300

o

(20 marks)

©Copyright CTHCM, 2005

4

ADHM 231: Management Accounting - Examination - January 2005

CONH.OEMTION OF

~n.~U 1'111

TOUR ISM' HOTEL· CATERING

MANAGI:..MeNT

---------------------------------_._- ---.-.

B2

Marna Mia's Restaurant

Mama Mia's Restaurant selves up to 1000 meals per week; the ASP is £18.00, with a sales mix of 70~~) food and 30<;/0 liquor. The food gross profit is 65% and the liquor gross profit is 60%. Other variable costs are £2.50 per head. Fixed costs (including semi-variable) are £3100 per week.

Calculate

a) The break-even point in number of covers and sales volume for the bistro.

(9 marks)


(2 marks)

c) The maximum profit that could be made each week.

(2 marks)

d) How many covers must be sold to achieve net profit of £600 per week?

(2 marks)

e) What would be the breakeven point if the food cost was 40%)

(5 marks)


5

MANAGEMENT

CONFE.DERATIUN OF

ADHM 231: Management Accounting - Examination - January 2005


B3,

The tables show a three-month budgeted cash Dow and profit & loss account for the Bedford Hotel.


6

Complete the tables using the actual results.

(15 marks)

Comment on your answer.

(5 marks)

Student name ..

CTHCM number .


Jan Feb March
Budget Actual Variance Budget Actual Variance Budget Actual Variance
--
Sales
Cash 9000 1 9000 9000
--
Cre,rut (from d,eb~!~)_ ___ 0 0 1000
-- 10000
Total I 9000 9000

Food and Beverage creditors 10001 I 4000 4000
Overheads (creditors) 500 1500 1500
Labour 2000 2000 2000
Capital expenditure I 4000
Drawings 1000 1000 1000
Total 4500 8500 12500
Balance 4500 500 -2500
Opening balance 1000 j 5500 6000
I
Closing balance 5500 - 6000 3500 ~ -~ ~~ctu;rL- '_ -- '-,.....---
---_ r---- f----.- -
~ud_ge!_ Variance
.. - ~-. %F_:~r-
-- t-- -- --
£ 0. ' £ 0./0. £ 0./0 £ 0/0 £ 0.
/0.
Sales 30000 100.00
Cost of sales 12000 40_00
Gross profit 18000 60.00
-
Expenses
Labour 6000 20.00
Overheads 4500 15.00
Loan interest 120 0.40 I
Depreciation 180 0.60
10800 36.00 10800 36.0Q
12QQ 24.00
___ .......L.___ ADAM 231: Management Accounting - Examination - January 2005

CON~EDF.IV.'IUN U~

i1nllill

TOUR ISM· HOTEL· CATERING MANAGE-MENT

_-----------------

The profit and loss account for three months


Sales were £12,000 per month, of which 10% were on one month's credit

Food and beverage costs were 38% of sales, and one months credit is given on all purchases Stock levels remained the same


Overheads not including depreciation and interest are £1600 per month Depreciation is £90 a month

Loan interest is 16% a year paid half yearly in June and December Drawings were £1100 per month

Capital expenditure of £5000 was paid in March

ENSURE YOU HAND IN THE COMPLETED TABLES WITH YOUR ANSWER BOOK

©Co.Pyright CTHCM, 2005

7

..

CONff.OFRATION OF

ADHM Bl: Management Accounting - Examination - January 2005

~ntml

TOURISM· HOTEL' CATERING MAN.'GEMENT

-------- - ----.------------

B4.

The following is a revenue account from the Nice's Restaurant.

Sales Cost of sales Gross_E!.?_flt_,
£ t f
----- -
Food 240,000 76,000 164,000
Beverages I 80000 33,000 470~
Total ,32QM:l_O l.P..2_,QQQ 211,000

Less expenses
Salaries and wages 82,000
Laundrv 8,000
---
Gas and electricity I 3,600
Repairs and renewals 4,000
Other operating expenses 24,000
Administration 8,000
Insurance 1,600
Rent 12,000
Depreciation 20,000
Interest 12,000 175,200
I
Net profit 35,800 Nico has also provided you with the following information.

a) The number of covers served during the year was 7,000 at lunchtimes and 12,250 at dinner

b) Revenue is split 40% lunch and 60% dinner

c) Food and beverage costs are in direct proportion to sales

d) £60,000 of the labour costs are fixed; the rest is variable

e) Laundry is variable with revenue

f) £2,200 of the gas and electricity is fixed and the rest is variable

g) Other operating expenses includes £5,000 fixed costs

h) Admin.istration, insurance, rent, depreciation and interest are all fi.'Ced

a) Calculate the ASP for both food and beverage at lunch and dinner

(2 marks)

b) Calculate the gross profit percentages for both food and beverage

(2 marks)

c) Calculate the restaurant's total variable expenses and express them as a percentage of

total revenue (3 mares)

d) Calculate the restaurant's total fixed expenses and express them as a percentage of total

revenue (3 marks)

IOCopyright CTHCM, 2005

8

CONrE.D£Ii.AT!ON OF

ADUM 231: Management Accounting - Examination - January 2005

PU-

nu 1"'1

TOURISM· HOTEL· CATERING j\.J!ANAGEMENT

The local restaurateurs association has provided the following information to Nico It relates to res taurants of a similar style to his, and shows averages for a number of items.

e) Complete this statement comparing the Creme de la Creme's performance with the

average of local restaurants (6 marks)

f) How does the net profit compare with other restaurants?

(? marks)

g) Is this a valid type of comparison?

(2 marks)

Student name .

CTHCM number .

Item Percent of revenue Nice's
Food sales 70-80
Beverage sales 20-30
Total sales 100

Cost of sales 35-44
Gross profit 56-65
--~~.~ c--
Salaries and wages 30 - 38
Laundrv 1.5-2
Gas and electricity 2-4
Repairs and renewals 1-2
Other operating expenses 4.3 -15
Administration 3-6
Insurance 0.8-1
Rent 4.5-7
De_Ereciation 2-2.8
Interest 0.3-1
.. j
I
Total expenses 52.4-65.5

Net profit before tax 1.5-12 ENSURE YOU HAND IN THE COMPLETED TABLE WITH YOUR ANSWER BOOK

(QCopYlight CTHCM. 2005

9

ADHM 231: Managcmcnt Accounting - Examination - January 2005

CONFf.DE!tAl·[ON or

~ntml


B5

Using the information given produce the following information for the Bedford Restaurant

a) Sources and Application of Funds Statement

b) Cash Flow Statement


(10 mares}

(10 JJlarkJ)

10

CONFEDF.lt:\T!UN or

~. n II1II.

:iU 1"'1

TOURISM· HOTEL' CATERING

ADHM 231: Management Accounting - Examination -January 2005

MANAGEMENT

------
Quarter ended June 30th Quarter ended Sept 30th
Sales 7.20000 200000
Opening Stock 1000 12000
Purchases 70000 10000
80000 82000
Closing stock 12000 13000
Cost of sales 68000 68000 69000 69000
Gross Profit 152000 13100
Wages 50000 5400_Q
Net margin 102000 77000
Overheads 46000 50000
Net profit 56000_ 270QO
Balance sheets
As at June 30th As at Sept 30th
Cost Depn Value Cost Depn Value
Fixed assets
Premises 220000 220000 200000 200000
Fum. & Equip 50000 6000 44000_ 80000 8000 72000
270000 6000 264000 280000 8000 272000

Current assets
Stocks 12000 18000
Debtors 6000 14000
Bank 8000 14000
26000 26000 1:6.illlQ 46000
Less current liabilities
Creditors 10000 1100
Overdraft Q Q
1QOOQ 10000 1100 1100
16000 16000 35000 35000
28QQQO _ 3Q70QO
Represented by:
Capital 24000 280000
Net profit 40000 27000
280QOO 280000 _ 3Q:ZOQO 307000 (OCopynght CTHCM, 2005

11

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