Accounting for strategic management & control – 2014/2015

Research-based Assignment

Case Study  Yr Ending Sept 2011    Yr Ending Sept 2012     Yr Ending Sept 2013     Yr Ending Sept 2014
£’000                                £’000                        £’000              £’000
Hotel Revenue     £5,431     £5,476     £5,614     £5,432
Ancillary Revenue     £2,214     £2,259     £2,190     £1,998
Hotel Contribution     £4,643     £4,689     £4,764     £4,572
Ancillary Contribution     £1,151     £1,210     £1,204     £1,109
Fixed Costs
Staff     £2,634     £2,519     £2,414     £2,278
Building Repair & Maintenance     £521     £491     £441     £392
Other building Costs     £425     £418     £413     £407
Other Fixed Costs     £407     £411     £421     £411
Marketing     £321     £451     £475     £506
Depreciation     £798     £810     £835     £803
£5107                               £5,099                       £4,999              £4,798
Allocation Of Head Office Costs     £421     £432     £442     £453

Profits
£266
£369     £527     £429
Net Assets     £3,991     £3,891     £3,808     £3,590

Other Operating Data
Hotels     14     15     16     16
Available Rooms     196     210     221     222
Rooms Occupied in Period     52,224     58,254     65,339     66,445

Notes
– Ancillary revenues include sales from hotel restaurants & bars & another other non-accommodation revenue streams
– The variable ancillary costs only include food & drink
– The variable accommodation costs only include cleaning & bedding
– Inflation for the periods above is 2.5%
The information above relates to BH Ltd. Four years ago Ave-Co Plc purchased the Boutique Hotels Group (BH) from their charismatic founder Layton Fry. The chain, which consists of 14 hotels across the UK, had become the ‘go to’ destination for the fashionable chattering classes. Each hotel had its own manager, who with Layton’s guidance & flair helped create the chic & luxurious environment that the discerning traveller requires. So successful was the formula that it was felt that many customers visited the location for the hotel, not the hotel for the location.
After purchasing BH Ltd Ave-Co restructured the company. Three regional managers were appointed & the Group was split into 3 divisions, the South, the Midlands & the North. The regional managers were given total control over their hotels and are able to set their own prices. The performance of the regional managers is measured by two Key Performance Indicators (KPI’s), which if exceeded result in a substantial bonus. The KPI’s are set by the finance department who are based at Ave-Co’s head office. The KPI’s the managers are measured against are hotel occupancy percentage & the return on investment. The KPI’s are collated each month & sent out as part of the management accounts pack. Apart from collating the KPI’s & producing the monthly management accounts the finance department have little interaction with either the regional managers or the individual hotel managers.
Despite positive early results, BH’s recent performance has been disappointing. Because of this Ave-Co Plc are desperate to improve performance & have asked you to look at ways to improve long term performance.

You are required to:
– Produce 2 mind maps which are designed to present the key issues to the management team
– The first should analyse the problems BH are facing (you should pay particular attention to the control systems and finance function at BH)
– The second should draw the main points from a relevant article relating to either performance measurement systems or strategic management accounting. The mind map should acknowledge the article’s context, methodology, limitations and the main arguments

– Produce a brief executive report for the management team at Ave-Co, which makes a limited number of key recommendations to the board giving reasons based on critical evaluation of both the article and the business situation
The Specification Guidelines for the assignment are as follows:
??The article must be from a refereed academic journal
??The articles context, methodology and findings should be relevant to the business situation
??The assignment must be set in the context of management accounting
??The mind maps may be drawn by hand
??The executive report should not be more than 750 words long (excluding figures and tables).
??The assignment must be properly reference (Harvard APA format)
??You should include a bibliography which includes both the sources you have cited and the sources which you have consulted in preparing your work,
??Issues relating to – use of English, punctuation, numerical errors etc. are primarily the responsibility of the author. This means that you should have thoroughly proof read and corrected the paper before submission.

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