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Discuss the financial and non-financial consequences of closing down the restaurant department

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Accounting 1

Traditions Ltd

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( Institutional Affiliation )

Question One.

Fringy costing,

Comparison between Traditions Ltd Marginal costing for all sections and without the eating house section ;

Without the eating house, the shop is profitable. The shop is capable of doing a net income of ?9,000. This indicates that the eating house section is doing losingss. Even without seting the fixed cost incurred by the concern into consideration, the eating house had made a part of ?-30,500 in that peculiar period entirely.

This is a high degree of loss to be incurred by merely one section. Among the other three sections, trappings is the least profitable. This is because ; the sum of purchase for resale that ends up being sold is really low. This increases the stock in the shop such that shuting stock for the trappings section is really high as compared to the other section. By the terminal of the period, shuting stock is more than the gap stock. This indicates that there were fewer gross revenues made in this section during that peculiar period.

Question two.

Fiscal and non-financial effects of shuting down the eating house section ;

Following the fiscal place of traditions Ltd analyzed in the old sector, the eating house section was doing losingss. This has prompted the direction of the shop to see shuting down the eating house section. Doing so, traditions restaurant is will be faced with assorted deductions, both fiscal and non fiscal.

Closing down the eating house section will take to decrease in the overall net incomes realized. This is because ; the part border will increase taking to decrease in net incomes. This is because fixed cost will be shared among three sections. Since fixed costs per period of clip do non change by the sum of units produced, the other three sections will hold to incur these costs. This will increase the overall costs taking to reduced net incomes. As indicated in the computations of fringy costing statement, when the concern is runing four sections, the entire part border was ?390,500. On shuting down the eating house, the entire part increased from ?390,500 to ?421,000. This means that a higher part border is to be shared between staying sections.

Another fiscal deduction of shuting down the eating house is that the shop will be required to retrench workers. The concern will hold to pay employees in the eating house section such as Claude. This will hold a negative fiscal consequence on the concern. Socially, when a concern retrenches workers, clients do non wish to be associated with it. In this context, Claude is a celebrated chef particularly after winning the potato-sculpting competition. This made him celebrated as he created client trueness. Many clients visit the shop because of him. Closing down the eating house will cut down clients who besides shop in other sections. This will take to a diminution of gross revenues in the other three sections. Decrease of gross revenues will take to decrease of overall net incomes in the concern ( Tennent, 2008 ) .

Another fiscal consequence of shuting down the eating house will take to low merchandising of the eating house assets. As indicated, the eating house has been holding challenges sing its’ assets such as the dough sociable. Due to hapless care of these equipments, they may be valued really ill. This will restrict the shop in retrieving some of the costs.

Other than fiscal deductions, the shop will besides confront non-financial challenges as a consequence of shuting down the eating house section. One of the chief challenges is bad image of the concern which will be brought about by retrenchment of employees. Potential clients dislike concerns which frequently lay of their employees because ending employee’s employment suggest that the concern is no longer profitable. More so, society does non like concern entities that lay off employee because unemployment is viewed as bad. These employees have households and other duties to take attention of, without their occupations, they can non. As such, it is viewed as the mistake of the shop that these households will endure. Potential clients will non wish to be associated with such concerns ( Drury, 2006 ) .

Question Three,

As direction comptroller, Samantha will be required to fix, come up and analyze fiscal information for the shop. This will be really hard since she does non hold anterior experience in direction accounting. More so, the company does non maintain good organized information informations base. There is no old history of direction information in the company and as such, she has to first of all collect her ain direction information. This is instead a really boring. In her function, she will hold the duty to guarantee that the direction of the shop has to do determinations which are good informed from now traveling frontward so as to vouch the store’s hereafter profitableness, stableness every bit good as its growing.

Samantha will hold to come up and keep direction information systems every bit good as fiscal policies by interceding with the direction to supply a better support service on all facets of finance. As indicated, Samantha and some of the direction co-workers such as Albert frequently argue. More so, the top direction co-workers are old and will non for certain understand to the full these fiscal policies so as to do sound direction determination sing the company.

Her function besides includes looking into the hereafter. She is supposes to analyse the public presentation of the concern in the past old ages and offer advice to the direction on how to forestall challenges that the concern brushs. Presently, the eating house section is doing losingss and as such, it is her duty to advice the direction whether to shut down the eating house or to set more capital in it so as to do it more profitable as Claude advices. She will be required to do Traditions Ltd adapt to altering environment. The direction of the shop prides itself on running the shop through keeping the criterions of services and clients relationships which is chiefly related with a water under the bridge epoch. This means that the shop can non be able to pull the immature in-between category people who provide a really important market. It is her responsibility to do certain that the shop lights-out in this market so as to increase gross revenues. She should advice the direction on acceptance new and approaching tendencies so that they can be able to do determinations which will inline the shop to new tendencies hence attract more clients.

It is her responsibility to place sections that need decrease in operational and production costs. Most significantly she should be able to set up better and effectual schemes so as to command disbursement. This will affect cut downing the disbursement wonts of some section and increasing others. Each section is headed by a household member and in mention to their relationships ; some of the directors of sections such as Albert will non be willing to cut down their disbursement wonts to increase other sections. Since is a household owned concern, sibling competition will be ineluctable conveying about more challenges and dissensions among determination shapers.

Management Information System ( MIS ) for Traditions Ltd ;

Management information system ( MIS ) is critical in its function as an agent of sharing information within a concern. There are assorted factors to see while implementing a direction information system at Traditions Ltd ( Graham, 2005 ) ( Clarke, 2010 ) .

These factors include ;

  • The degree of cognition of the users. Traditions Ltd is a household owned shop. The directors of the shop are above 50 old ages of age and most of them have small or no cognition of what direction information system is. These directors besides do non hold siblings to move on their behalf. They are required to entree the MIS and efficaciously utilize it on day-to-day footing. As such, the direction information system that can be effectual in the shop should be easy to utilize for the direction and simple to understand ( Khosrowpour, 1997 ) .
  • The security of the system. A unafraid MIS should be implemented in the shop. Since the shop is household owned, there may be conflicting involvement within the household. A direction system should be in such a manner that it is crystalline and each member with entree should be able to see what others are making ( Galletta & A ; Zhang, 2006 ) .

Stock control systems ;

Stock pickings is a procedure that requires the doing a list of stock with their location and value. A stock control system must be able to demo make orders, path stock degrees every bit good as issue stock. The systems should incorporate information on the value, location, description, reorder degrees, measures, supplies and information on old stock history ( Office, 2009 ) .

Inventory turnover is a ratio that describes how many times a concern stock list is sold and replaced over a period of clip. To cipher the stock list turnover yearss, the yearss in the period are divided by the stock list turnover expression. Inventory turnover ratio is a cardinal step for finding the efficiency of the concern in direction of company stock list every bit good as doing gross revenues from it ( Wanjialin, 2004 ) .

It can be calculated as ;

Inventory turnover =cost of goods sold/ mean stock list. Or


Day gross revenues Inventory is merely the opposite of the stock list turnover ratio multiplied by 365. i.e.

Dayss Inventory= ( Average Inventory/Cost of good ) *365

Question 4

Budgetary planning and control system ;

Budgetary planning is the procedure by which a budget is prepared in an organisation. A budget is a program which is expressed quantitatively for a specific period of clip. It can include assorted points such as assets, liabilities, planned gross revenues end product and grosss, sum of resources, hard currency flows and costs and disbursals. As a direction comptroller at Traditions Ltd, budgetary planning is critical in the operations of the shop. This is a procedure that will affect placing aims, looking for options and roll uping information about them and taking the best option that suits the shop. The concluding measure is to implement the chosen options to accomplish the set aims. In be aftering the budget, one needs to do certain that the programs are decently quantified, financed and be able to command resource allotment and public presentation ( Plumptre, 1988 ) ( Bogsnes, 2009 ) .

The chief maps of the direction accountant involve prediction. This is where I am supposed to put down nonsubjective to be achieved at the terminal of a specific period. Come up with a program on how these forecasted aims are traveling to be realized. Communicate this program to all members of the sections in inside informations so that they can follow the program comprehensively. Coordinate assorted sections by maintaining an oculus on what is go oning within the operation of the shop. Choose a squad of directors and supervisors who are traveling to supervise every twenty-four hours activities in the shop and do studies. Come up with mandate protocol where every employee should be able to follow. To hike morale and promote employees, motivate employees either through giving wagess for best performing artists or publicities. Measure on regular footing the public presentation of the shop to cognize whether the shop is in line in realizing of the set aim ( Radev & A ; Allen, 2006 ) .

Some of the behavioral jobs one might meet as a direction comptroller are the involuntariness of some direction co-workers every bit good as other employees in the execution of the program. Since this is a household concern, and each section is headed by a household member, some of them may be unwilling to collaborate particularly when it comes to funding. This might ensue in misgiving, go forthing behind some facets of the program which will take to under realisation of the aim. Budgets are clip devouring and boring. As such, a direction comptroller should be ready to work long hours without wage so as to run into deadlines ( Lacey, 2013 ) .

The best manner to derive budget control in the concerns is through the analysis of discrepancy. There are two types of discrepancy analysis. One is the fixed analysis which does non alter with the degree of activities within the concern. The other one is the flexed analysis which is prepared in such a manner that it can be altered to bespeak the existent activity involved. A flexed discrepancy analysis will accommodate Traditions Ltd. This is because ; the direction comptroller should be able to supervise each and every activity that is taking topographic point in the shop.

Actual profits= budgeted profits+ favorable discrepancies – inauspicious discrepancies.

For budgetary control to be effectual, serious attitudes should be emphasized. There should be clear boundaries between managerial responsibilities and other responsibilities undertaken by employees. Budget marks which are disputing should be identified and more accent put on them. Routines for informations aggregation, analysis and coverage should be established. Reports should be aimed at several directors and describing periods should be reasonably short. Time discrepancy studies should be prepared and where they are inauspicious, action should be taken to acquire back to favorable ( Business: The Ultimate Resource, 2003 ) .


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Business: The Ultimate Resource.( 2003 ) . Beijing: Citic Publishing House.

Clarke, S. ( 2010 ) .Computational Promotions in end-user Technologies: Emerging Models and Frameworks.Hershey: Information Science Reference.

Drury, C. ( 2006 ) .Cost and Management Accounting: An Introduction.London: Thomson.

Galletta, D. , & A ; Zhang, P. ( 2006 ) .Human-Computer Interaction and Management Information Systems: Applications.Armonk: M. E. Sharpe.

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