Introduction to Finance and Funding in the Tourism Sector
Travel and tourism management [TTM] is a crucial part for every country in which many type of services are provided to tourist. It is a holiday activity by which people go for the relaxation with their family. Tourism and travel are two different thing where travel is simply a movement on which people go for journey by any transport such as train, bicycle, and airlines and so on.
In this report The Carib happy Tours Company is a private entity who deals in the summer holiday packages and different services. In which it’s provide a private charter only for their tourist guest and company also focuses on accommodation which arranged in hotel and aeroplane for customers comfortability. CHTC charge £800 per tourist and total cost for accommodation for 2 weeks is £60,000. I n addition CHTC evaluate CVP importance in decision making process related to the travel-tourism. In this management accounting, financial accounting is considered in context of TTM. Moreover in these report proper analysing the source of funds that will be assists for the development in TT sector.
Task 1
A) Concept of CVP analysis and its importance
Cost volume profit analysis is a proper analysis in which variable cost, fixed cost, selling price, volume of sale are evaluated. It is also assists for determining net income and operating income. For systematic analysis various assumptions can be perform such as production management, fixed and variable cost are constant or not and many more. In travel and tourism sector, CHTC evaluate importance of cost and volume and they are as follows...
Contribution Margin
It is a margin percentage in which contribution is divided by the sales so that percentage will be find out. CHTC use this term to find out the contribution margin in their holiday packages. For these following formula is used to find out the percentage.
CHTC Company has adopted 40% margin in their holiday packages. It will assists for the set margins and also its effectiveness in total sales.
MOS
MOS is stand for margin of safety and this is used in a travel-tourism sector to compute total amount of sale after excluding break even sales. It will assists for set high margin so that there is a low risk in the tourism sector. In other words it is also a forecasting which expressed safety margin for better sale in future.
Break even analysis
It is often called sale mix in which total selling part are evaluated. CHTC has many holiday packages and all having different margins so that Company can use sale mix in the calculation of total selling (Becker, 2016). BEP manage the balance between profit and loss and compute a point where no profit and loss is there. All above points are playing very important role in travel and tourism sector for better consideration of budgets
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