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BIZ201_Assessment 4 Brief_M6_Case Study Page 1 of 19 ASSESSMENT BRIEF Subject Code and Title BIZ201 Accounting for Decision Making Assessment Case Study Part B Individual/Group Group (2-3 students) Length 2,000 words Learning Outcomes a) Explain and evaluate the role and importance of financial information in business decision making b) Apply relevant accounting concepts to simple business scenarios d) Apply basic costing and budgeting techniques to business decision making e) Apply capital budgeting techniques to capital investment scenarios Submission By 11:55 pm AEST/AEDT Thursday of Module 6 (week 12) Weighting 40% Total Marks 100 Context: This assessment is aimed at consolidating knowledge from Modules 1-6. By prescribing this assessment, you are able to reflect on your understanding of the importance financial information in business decision making and be able to apply costing and capital budgeting techniques to business scenarios like given in this case study. Instructions: 1. The facilitator will create a group of 2-3 students for this assessment. This assessment should be prepared as a group. One submission per group will be allowed. The members of the group need to be clearly stated in the Business Report. 2. Two files have to be submitted, the Excel Workbook (AU - Crystal Hotel Case Study Workbook Part B student.xlsx) including calculations and the Business Report summarising the tasks and recommendations. This workbook is attached under Assessment Information Section. You can download and work on it. All the calculations should be done in Excel and only the final tables should be included in the report. 3. You should include a reference list to any textbooks, websites or other resources used to prepare the answers including references to suppliers that the costing was based on. BIZ201_Assessment 4 Brief_M6_Case Study Page 2 of 19 4. For every task you are required to show all workings. The Excel Workbook should include formulas whenever appropriate. Copy pasted numbers with no workings provided are not acceptable. 5. Unless otherwise instructed, numerical answers should be rounded to 2 decimal places. 6. Submit your assessment files using the following naming convention: First Name_Last Name_BIZ201_Case_Study B_ Group_Assessment4_Workbook.xlsx First Name_Last Name_BIZ201_ Case_ Study B_Group_Assessment4_Report.doc BIZ201_Assessment 4 Brief_M6_Case Study Page 3 of 19 Crystal Hotel Pty Ltd introduced in Part A of the Case Study has a quite flat organisational structure as per the chart below. The General Manager oversees each departmental manager directly. You have been offered an internship opportunity as a group to show your skills and how you could be of benefit to the organisation. At the end of the internship, there may be an employment opportunity for the members of the group. You need to choose as a group whether you would like to take on your internship in the Sales and Marketing Department or Functions and Events Department. Based on your choice, complete the section of the assessment related to the department you have selected. General Manager Rooms Division Human Resources Accounting Sales and Marketing Functions and Events Food &Beverage Executive Assistant Manager Crystal Hotel Case Study BIZ201_Assessment 4 Brief_M6_Case Study Page 4 of 19 As per information provided in part A of the case study, the owners of the Crystal Hotel are planning to renovate and refurbish the hotel. A part of the redevelopment plan is to build a Wellness Centre on the rooftop of the hotel. The Sales and Marketing Manager volunteered to help with this project. He is a strong believer that it would bring the hotel up to the next level and also that it would attract additional customers to the hotel. Due to the location of the hotel being within a close proximity to the business district of Pa ramatta, he believes that the Wellness Centre should be opened to external clients as well. He suggests employing a full time, in-house trainer and a part-time dietician. He believes selling monthly membership including training sessions and dietary advice will attract additional clients who may then promote the hotel to their employers for accommodation and other business related services. The marketing manager wants to be well prepared to support the Wellness Centre project and needs help with few tasks from your team. TASK 1 As part of the Wellness Centre Project, the plan is to build a small gym on the rooftop of the hotel. You have been appointed to help the Sales and Marketing manager to make decision whether to rent or buy specific equipment items. The required items are included in Appendix 1 together with costing information. The budget for the required equipment is $45,550 for the life of the equipment. The useful life of the equipment is predicted to be 3 years after which it will need to be replaced. At the end of its useful life, it is expected to be sold for the residual value of 5% of its original cost. From the renting options, choose the one that is the most beneficial for the business. The rent is expected to rise by 3% each year. The rent is paid at the beginning of each period. Servicing of the equipment is included in the rent price. Assume that servicing its own equipment will cost the hotel additional $600 every year over the period of its useful life. Assume that servicing is done at the end of each year. Ignore GST for the purpose of this assessment task. REQUIRED The manager would like to know whether it would be better for the Hotel to buy the required equipment or to rent it. Explore both options and make a recommendation. Take into account the time value of money at the discount rate of 8%. Base your decision on the total cost of the specified equipment, not on an item by item basis. Sales and Marketing Department Assessment BIZ201_Assessment 4 Brief_M6_Case Study Page 5 of 19 All calculations are to be done in Excel. Summarise your findings in the business report. Include advantages and disadvantages of each option and explain your choice. TASK 2 The Sales and Marketing Manager has an idea of creating monthly memberships for external visitors that he would like to explore further. He is thinking to create two types of membership options. A Basic Membership which would include access to the gym, sauna and pool and it would cost clients $40 a week. A Full Package Membership would additionally to the access include a one hour weekly session with the in house personal trainer and a dietician consultation once a month. Clients would pay $81 per week for this type of membership. He believes that an initial investment into promoting the centre would be $35,350 and subsequent cost of continuous promotion would be $808 a month. At the beginning he would like to make the service more exclusive and cap the membership to 20 basic membership clients and 30 full package membership clients. He wants to create a feeling of exclusivity amongst the clients. Based on his calculations he believes offering the membership to the external clients would generate total revenue of $137,360 in the first year increasing by 10% every year after that. The in-house trainer is expected to cost the hotel $5555 a month and the services of dietician additional $1515 and both are expected to increase by 3% each year. REQUIRED Calculate the net present value of the external membership project over the next 3 years period. Use yearly basis for your calculations. The estimated cost of capital for the hotel is 8%. Assume 30% company tax in Australia when determining the values of the after tax net cash flow for each year. Based on your analysis would you recommend accepting the project and offer the membership to the external clients? Explain the basis for your recommendation. TASK 3 Once the Crystal Hotel Wellness Centre is ready for opening, it will need to be promoted to existing and potential new clients. There is already an opening event (luncheon) planned which is handled by the Functions and Events Department. The overall budget for promoting the opening of the centre is $35,350. The opening luncheon is budgeted to cost $20,200. Your team has been appointed to plan additional promotional activities for the remaining $15,150. The budget is aimed for the promotion of the opening of the centre only. Continuous promotional activities as well as online advertising will be handled separately. BIZ201_Assessment 4 Brief_M6_Case Study Page 6 of 19 Initial research has been done by the marketing team and the promotional activities to be considered are listed in the Appendix 3. Negotiated pricing has been included as well. REQUIRED Your task is to choose suitable promotional activities from the list provided to you and create a promotional budget for the Crystal Hotel Wellness Centre opening. Use the budget template provided in the excel file and adjust it as appropriate. Use Excel formulas to calculate your values. The final budget is to be included in the business report as well. TASK 4 Marketing team has suggested Crystal Hotel to run a promotion. They are charging $80 per person for one night’s accommodation including breakfast. The variable cost per person is $35 which includes food, cleaning and utilities. Fixed costs are $45, 000 per year which include council rates rate, water rates and land taxes. REQUIRED They have asked for your expertise to carry out a CVP analysis for this promotion. Calculate the following: 1. The contribution margin per unit of service (a unit of service is one night’s accommodation for one guest). 2. The contribution margin ratio. 3. The annual break-even point in units of service and in dollars of service revenue. 4. The number of units of service required to earn a target net profit of $ 100, 000 for the year (ignore income taxes). 5. Analysis the importance of CVP analysis and comment on effectiveness of this promotion based on your calculations. BIZ201_Assessment 4 Brief_M6_Case Study Page 7 of 19 TASK 1 As part of the refurbishment project, the Crystal Hotel would like to introduce fresh plants into the lobby area, function and conference rooms. The