FEEP

ACCOUNTING FOR BUSINESS DECISION (MBSA 1413)

BY
OWI WEI LUNN (MBS221015)

LECTURER: DR. NOR AIZA MOHD ZAMIL

 Contents

1.1 Background ......................................................................................... 1

1.2 Mission ................................................................................................ 1
1.3 Vision .................................................................................................. 1
2.1 Accountant Background ..................................................................... 2
3.1 Findings............................................................................................... 2
3.1.1 Business Plan, Objectives and Goals ............................................. 2
3.1.2 Short-term and Long-term Objective............................................ 2
3.1.3 Determine Cost of Services and Costing Type............................... 3
3.1.4 Budgets Preparation...................................................................... 3
3.1.5 Performance Measurement ........................................................... 3
4.1 Literature Review ............................................................................... 3
4.1.1 Management Accounting Practices ............................................... 3
4.1.2 Business Plan ................................................................................. 4
4.1.3 Service Costing .............................................................................. 4
4.1.4 Budgeting ...................................................................................... 5
4.1.5 Performance Evaluation................................................................ 5
5.1 Discussions .......................................................................................... 6
6.1 Conclusion........................................................................................... 7
References .................................................................................................... 8
1.1 Background
Lazenda Hotel was established in year 2014 by the Chai and Chin Family Group. Under
the Lazenda Hotel are their sister hotel that is Tiara Hotel and also Palm Beach Hotel. With
current number of employees almost 176 persons, Lazenda Hotel is one of the most successful
hotels in Federal Territory of Labuan competing alongside with another 54 more hotels.

Located in the heart Labuan Island, at the south western part of Malaysian Borneo;
featuring 172 guest rooms plus 35 suites at the opposite building called Lazenda Suites and
ample facilities boasting harbour and urban-scape views from our rooftop facilities, the
Lazenda brand brings a contemporary style with a rustic Bornean touch to the rooms for the
pleasure of guests.

Lazenda Hotel would be the finest option for visitors who also seek "city hotel"
accommodations. It is not surprise that Lazenda Hotel is a favoured choice for business
travellers given its proximity to the Labuan Intentional Airport—just a 5-minute drive away—
and the Labuan Ferry Terminal—which is even closer. After all, it's only a 2-minute drive or
0.3 km to the Labuan Financial Park.

Additionally, Lazenda Hotel provides business facilities for those who would like to hold
meetings, seminars, networking sessions, etc.

Pestle Restaurant is the name of the food and beverage establishment at Lazenda Hotel.
Here, visitors can take advantage of the free breakfast buffet. It provides all-day dining and
serves à la carte menu items for Western, Chinese, and regional cuisines.

The Lazenda company has a subsidiary company called Mortar Café & Lounge. This
coffee shop is next to the Lazenda Hotel. Mortar, which advertises with the slogan "Eat, Chill,
Drink," draws a fair mix of locals and visitors of all ages.

1.2 Mission
To attract visitor around the globe and various markets, including the leisure, corporate,
military, wholesales markets, individual and group tours.

1.3 Vision
To provide a memorable experience to our customers in various aspect of their stay.

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2.1 Accountant Background
For the interviewed accountant, her name is Shahfikah Jimiling. She is 23 years old and
her race was Kedayan, an ethic group which believed are from Kalimantan and later residing
in Federal Territory of Labuan on the island of Borneo. After graduated from University of
Sabah, Kota Kinabalu on year 2018, she enrolled in the Lazenda Hotel as an assistance
accountant and current experience in the accounting management is about 5 years.

3.1 Findings
3.1.1 Business Plan, Objectives and Goals
For the time being, Lazenda Hotel business plan was to open another two more
restaurant outlets in the town of Labuan in order to gain more profit from the income of the
restaurants. Lazenda Hotel plan to make sure all the tourists or customers that come to Labuan
for leisure or business purposes to stay in their hotel and enjoy all the facilities of Lazenda
Hotel. Beside providing top quality of hotel services, Lazenda Hotel also focus on the
development of the restaurant Mortar Café & Lounge which is also one of the main attractions
of the hotel.

Lazenda Hotel’s executives will monitor from time to time all the plan and their Finance
Controller will do the budgeting. Beside the Finance Controller, the Human Resource will also
be involved in order to achieve the goals.

The objective of the Lazenda Hotel is to provide outstanding lodging facilities and
services to the customers. Lazenda Hotel also focus on individual business and leisure travel,
as well as travel associated with group meetings. Lazenda Hotel goal is to offer their customers
with the best services that will exceed their expectations and satisfy their needs, as well as run
the business in a way that will guarantee their success and make the best use of manageme nt
skills and resources.

3.1.2 Short-term and Long-term Objective

Lazenda Hotel current short-term objective is to increase the overall occupant of the
hotel. As for now, Lazenda Hotel main focus is on the hotel services for the tourists,
government servant, and etc. In order to increase their profit, they need to attract more
customers to occupy their hotel.

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 As for the long-term objective is to make sure their hotel provides good service and
make sure the customers always think of the Lazenda Hotel as their first choice of selection
during their tour or work to the Labuan in term of stay in, holding functions, organizing
meetings and also dine in.

3.1.3 Determine Cost of Services and Costing Type

Lazenda Hotel uses standard costing type for their services. As for the costing of the
hotel room is based on the size of the room the customers required. As for the Standard room
price for RM195.80, Deluxe room price for RM217.80, Superior room and Suite price for
RM250.08 where Junior Suite price for RM286.00 where Executive Suite for RM481.80. The
service costing is quoted based on the size of the room as for the standard price for a hotel room
plus the service cost of the cleaner to reclean and set-up the room which had been used. As for
the amenities of the hotel room, it was following the standard hotel regulations.

3.1.4 Budgets Preparation

Lazenda Hotel budgeting is based on the profit of the company by end of the month.
By end of the month, the accountant will do the budgeting in order to pay to the hotel’s supplier
and the salary of all employees of Lazenda Hotel.

3.1.5 Performance Measurement

Lazenda Hotel’s executives will measure performance based on their services and will
make sure all the customers satisfied with their services. Performance was measured based on
the review of the customers for the hotel.

4.1 Literature Review

4.1.1 Management Accounting Practices
A number of techniques that are typically used by manufacturing companies to support
their infrastructure and management accounting procedures are referred to as manageme nt
accounting practises (Ittner & Larcker, 2002). Costing, budgeting, performance evaluatio n,
information for decision- making, and strategy analysis are some of the methodologies used in
management accounting, among many more. According to Ittner & Larcker (2001), the
development of these new approaches has changed the fundamentals of manageme nt
accounting into a more significant one that enhances a variety of procedures. The research has
also demonstrated that most manufacturing companies do not strongly favour specific
methodologies, such as absorption costing and marginal costing. Additionally, Dugdale and

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Jones (2002) asserted that these costing methods are constrained since they do not offer a
precise way to record expenses so that they can be exact in order to make wise manageme nt
decisions. Particularly from the 1990s, a sizable amount of research investigating modern
MAPs in companies arose. These investigations were primarily motivated by allegations that
management accounting is irrelevant to modern managerial requirements, particularly in
modern manufacturing, and that there is a disconnect between management accounting theory
as presented in textbooks and management accounting in practise (Drury et al., 1993).
Organizations began embracing modern MAPs in tandem with economic growth as they
attempted to organise and focused on a more strategic orientation (D. D. Cuzdriorean, 2017).
Five particular categories of MAPs are, i) Costing, ii) Budgeting, iii) Performance evaluatio n,
iv) Decision making practices (Decision support system) and v) Strategic analysis.

4.1.2 Business Plan

A business plan is a written document that describes in great depth the goals and
objectives of a company. A business plan outlines a documented strategy for the company's
operations, finances, and marketing. Business plans are used by both new and established
businesses. A business plan is a crucial document intended for both internal and external
audiences of a company. For instance, before a business has built a solid track record, a
business plan is utilised to entice investment. Securing financing from financial entities might
also be beneficial. A business plan can also help a company's executive team stay on the same
page with regard to key action items and on track to achieve set objectives. Every firm needs a
business plan, but new enterprises might benefit greatly from having one. The plan should
ideally be reviewed and revised on a regular basis to account for goals that have changed or
been attained. An established company that has decided to take a new course occasionally
needs a new business strategy.

4.1.3 Service Costing

The calculation of the entire operational costs incurred on each unit of the intangib le
product is sometimes referred to as service costing or operating costing. These intangib le
commodities or services might also take the shape of internal services provided by businesses
in order to facilitate the production of tangible items. Or through the use of external services
that are provided to customers by businesses in the service industry as a significant product.

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 Since every service company needs to determine its operating expenses, service costing
is a crucial idea. It is done to maintain control over the constant and variable costs of the
products, or services, and to assure fair pricing of those things.

4.1.4 Budgeting
Budgeting is referred to as a crucial tool for planning, monitoring, and allocating
resources within an organisation in order to fulfil its goals and objectives (Drury et al. ,1993).
The several methods of budgeting, including activity-based budgeting (ABB) and activity-
based costing (ABC), were also emphasised by Drury et al. in 1993.

Activity based costing (ABC) is one of the finest methods for improving a cost system,
according to Horngren (2009). In addition, ABC is used to determine the price of a good or
service inside the activity. The ABC method of allocating overhead expenses "uses a variety
of overhead rates to lag secondary costs by the activities that use those costs." (2009) Willia ms
et al. ABC appears to be a better method for determining how much a good or service will cost
based on the resources or money required to create and produce it.

The definition of activity-based budgeting (ABB) is the allocation of resources to

specified activities (Ayvaz & Pehlivanli, 2011). In practically all businesses, budgeting is
regarded as a significant control system (Hansen and Van der Stede, 2004). This type of
budgeting technique is frequently used because it places more emphasis on the activities inside
the process than on expense items. Its major purpose is to compile all process costs, includ ing
materials, setup time, labour hours, and manufacturing overhead that will be factored into the
budget.

Studies have revealed that most businesses prefer to utilise ABB costing systems than
ABC ones, according to Drury et al. (1993). They supported their views by pointing out that
most businesses were employing ABC in addition to the ABB-based budgeting. ABB has a
comparative advantage over ABC since it is thought to be more thorough and accurate because
it provides a complete analysis of the costs to be anticipated.

4.1.5 Performance Evaluation

According to Emmanuel et al. (1990), management accounting serves the important
function of performance evaluation. Performance evaluation, according to Jusoh and Parnell
(2008), provides information for administrators to maintain the achievement of their company's
strategic goals. Hall (2008) noted that firms are currently looking to improve their performance

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measurement systems (PMS) in order to give managers and staff members information to aid
in managing their operations. Value-based management (VBM), activity-based manageme nt
(ABM), the Balanced Scorecard (BSC), European Foundation for Quality Manageme nt
(EFQM) excellence model benchmarking, Strategic Enterprise Management (SEM), and Six
Sigma are the performance assessment frameworks introduced by CIMA (2002).

The "Economic Valued Added" was defined by Ittner & Larcker (1998) as examining
the real value that has been added to the company and its cost of capital (for instance,
stakeholders' investment). The difference between a company's net operating income after
taxes and its cost of capital, which includes both stock and debt, is known as EVA. (1997; Chen
and Dodd). The EVA method has not gained much traction with businesses. EVA, however,
was seen to be a useful tool for monitoring performance evaluation in the future.

The weighted average cost of capital is one of the key weaknesses of the method, which
can occasionally be difficult to define. The balancing scorecard was recommended as a method
for managing the company's financial and non-financial aspects by Kaplan & Norton in 1992.
The scorecard's primary function is to allow information management to give the
administration feedback so that it may carry out strategic planning. When this form of
management style is employed, the business is able to maintain focus on its shared objectives.

5.1 Discussions
Based on literature review, Lazenda Hotel business plan is still not yet completed as
lack in detail how it plans to achieve its goals. If the business plan is not in details, it may lead
to all the company's executive team not on the same page about strategic action items and on
target for meeting established goals. In additional, ideally the plan is reviewed and updated
periodically but Lazenda Hotel seems not reviewed much on the business plan in order for the
employees to know that the reflect goals that have been met or have changed or move in a new
direction.

As for the Service Costing, Lazenda Hotel uses the normal costing. The service costing
is also added into the costing per room as it was quoted based on the size of the room as for the
standard price for a hotel room plus the service cost of the cleaner to reclean and set-up the
room which had been used. This is also including the laundry price for the mattress, towels and
others. Besides that, the costing also includes the electricity and also water fees in order to get
the price for a room.

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 For Budgeting, Lazenda Hotel I believed do at a good rate as the room price was differ
and not overrated based on the service costing. This type of budgeting technique is frequent ly
used because it places more emphasis on the activities inside the process than on expense items.
Its major purpose is to compile all process costs, including materials, setup time, labour hours,
and manufacturing overhead that will be factored into the budget. The budgeting for Lazenda
Hotel was also taken in accounted for the facilities provided by the hotel that is the gym, 24
hours receptionist, valet parking, breakfast at the Mortar Café & Lounge for 1 person and others.

Lazenda Hotel didn’t do much on the Performance Evaluation for the overall
performance of the hotel. As the hotel executives only measure the performance through the
customer’s review of the hotel after they stay. The Lazenda Hotel’s top management should
come out with a better balance score card for all the employees in order to track on their own
performance and in the same time making the whole group into the same direction and goals
that Lazenda Hotel’s need to achieve.

6.1 Conclusion
As a conclusion, proper account management gives more benefits to the business as it
helps in evaluating the performance of the business, help businesses to be statutory complia nt,
build business goal setting, and helps to manage and monitor cash flow. In my opinion,
Lazenda Hotel top management should review back their business plan as for the time being
although the hotel is performing well but in order for the hotel to grow further and into the right
direction, a business plan is a must. This also make the hotel’s employees to work together into
the correct direction in order to help the Lazenda Hotel to archive the goals they desire. Not
only short-term benefits but also long-term benefits to get the company to run smoothly for a
long time.

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