Ebook Hospitality management accounting (8th edition): Part 2

(BQ) Part 2 book "Hospitality management accounting" has contents: Cost management, financial goals and information systems, capital budgeting and the investment decision, cash management, statement of cash flows and working capital analysis, operations budgeting,.and other contents. | C H A P T E R COST MANAGEMENT I N T R O D U C T I O N This chapter introduces and describes various costs that exist in a business operation, including direct costs, indirect costs, controllable and noncontrollable costs, joint costs, discretionary costs, relevant and nonrelevant costs, sunk costs, opportunity costs, fixed costs, variable costs, semifixed or semivariable costs, and standard costs. The chapter continues by showing how to allocate indirect costs to departments and the potential difficulties this may create are discussed. Using relevant costs to assist in determining which piece of equipment to buy is illustrated. Fixed and variable costs are dis- C H A P T E R cussed in relation to their use in the management decision process; that is, whether to accept or reject an offered price for services to be rendered. The evaluation of fixed and variable costs is illustrated in three additional problems: to close or not close during an off-season period; deciding which business to buy; and deciding whether to accept a fixed or variable lease on a facility. Having illustrated how important understanding fixed and variable cost relationships as in the decision process, the chapter concludes with an illustration of how semifixed or semivariable costs can be separated into their fixed and variable elements. O B J E C T I V E S After studying this chapter, the reader should be able to 1 Briefly define and give examples of some of the major types of costs, such as direct and indirect costs, fixed and variable costs, and discretionary costs. 2 Prorate indirect costs to revenue departments and make decisions based on the results. 7 294 CHAPTER 7 COST MANAGEMENT 3 Use relevant costs to help determine which piece of equipment to buy. 4 Use knowledge about fixed and variable costs for a variety of different business decisions, such as whether to close during the off-season. 5 Define the term high operating leverage and explain its advantages .

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