Question

Question 1:

Tourism industry is one of the rapid growing industries around the globe. The boom of mass tourism at the twentieth century becomes widespread with the alternative tourism attendance. The conditions today forcing touristic destinations and tourism enterprises for challenging. This competition pressure affecting the choices and activities of the enterprises. Thus, the importance of utilizing the resources more efficient and effective becomes increased. Therefore, enterprises should more emphasis on cost management systems.

Questions for Discussion: (3 + 4 + 3 + 5 = 15 Marks)

a. How cost accounting helps tourism firm in determining the price? (300 words)

b. Which kind of decision can be taken by tourism firm using cost accounting method? (400 words)

c. Which technique of costing can be used in tourism firm and why that technique can be used? (300

words)

d. What are the benefits enjoyed by tourism firm by adopting cost accounting? (500 words)

Answer 1

A. Cost accounting is very useful in competitive market. In the given case as the competition is continuously incresing in the tourism indusrty. Target Cost accounting will be best to use it will help in deciding the pricing in the following manner :

In target costing indusry will first go through from the market condition and demand and after that industry will decide the target cost of the product or service and after that it will decide the target profit they desire to earn and at last they will have the selling price of the product and service. In short : Price will be determined by adding Target cost and target profit toghter .

This is how cost accounting will help in determing the price.

B. Tourism indusrty can take decision of target cost in cost accounting system in which they can take decision of value anlaysis and value engineering. .

In value anlaysis and value engineering the one decide about the following :

• Can we eliminate function from the production process
• Can we eliminate some durability and reliablity
• Can we minimize the design
• Can we design the product the suits the manufucrting process
• Can we substitute parts
• Can we combine steps
• Can we take suppliers assistance
• Is there better way

C. Tourism Indusrty can use technique of "Cost reduction" rather than cost control as to survive in competitive market one have to control the cost to make profits and also to make the selling price reasonable .

In cost reduction techniques and method like value analysis , target costing , Kaizen costing, BPR etc are being used .

Here in this case target costing will be better to use as it is very important to reduce the cost in competitive market so one can make its profits and also can provide the product and services on best prices to the customers . That's why target costing is being used

D. There are so much advantage of use of cost accounting system for example :

• Elimination of waste, ineffecinacy, losses etc
• Cost Reduction
• Identification of reason of profit and losses
• Advise on make or buy decison of product, parts etc
• Helps in price fixation
• Helps in cost control
• Provide assistance to Government
• Help the trade union
• Fixation of responsiblities
• Helps in identification of fradus

These were some of the advantage an Indusrty can get by use of cost accounting system