These items were carefully chosen so they could fall within the allocated budget. I considered product quality since the hotel management needs products that can withstand heavy use. The items will be sourced from various retailers in Australia and no item will be imported because of the high costs involved in importation. This analysis requires the approval of the General Manager and Financial Controller. I secured at least three quotes for each item and made a comparison although I only had to list one.
My target was to use at least 50% of the total budget allocated, so as not to compromise on quality. The extra amount (variance) can be used to incur any extra costs or relevant changes as approved by the management. The table below indicates the total amount for the various assets and the total expected amount.
The following table outlines all the items chosen and their corresponding costs.
B) The advantages and disadvantages of each of the following finance/purchase options as it relates to the purchase of the mini bus:
Outright purchase means the hotel will have to part with full cash, which in this case may be high because of the type of good. Outright purchase enables the hotel to determine whether it is spending within its means. In addition, this option enables the hotel to keep debts at bay. Once the hotel pays for the minibus, there will be no additional payments in the future. Therefore, the new hotel avoids future expenses that may affect operations.
Leasing the minibus can be advantageous because there are lower monthly payments involved. In addition, the down payment tends to be little compared to renting. This will give the hotel an opportunity to begin enjoying the services of the minibus even though it does not fully own the bus. Therefore, the hotel will have cash available for other activities. In other words, leasing enables the hotel to acquire the expensive minibus for less money. Leasing has some disadvantages. For example, in case the hotel decides to terminate the contract, it will be required to pay an early termination fee, which may be enormous (Rutes, 2001).In addition, the hotel does not have full ownership of the vehicle and cannot use it as it pleases. Lastly, the hotel may incur extra costs for wear and tear if the minibus is not properly maintained.
Acquiring the minibus through a bank loan gives the hotel full ownership of the minibus and the vehicle can be used as the hotel pleases (Rutes, 2001). Bank loans give the hotel the opportunity of ownership despite lack of funds. The loan acts as a reliable method for financing the hotels activities since it places the hotel at a higher financial level. However, the cost of bank loans tend to be high as the hotel will be required to finance the loans in future with an interest. Eventually, the hotel will be burdened because it will have to make the future payments or risk losing some of its assets. It can also be difficult to obtain the loan if the hotel does not have a substantial record of accomplishment.
Hiring or renting the minibus has the advantage of enabling the hotel enjoy the services of the bus without full ownership. In addition, the payments for renting tend to be flexible and the hotel has a chance of saving cash by only renting when it is necessary. However, this process can be expensive if the minibus is needed for a longer time. The hotel will be required to make frequent payments, which may cause a financial strain compared to outright purchase or leasing.
In my opinion, I would chose leasing because there is a given time period upon which the hotel can closely monitor its revenue, while making all the necessary changes to ensure the minibus is used optimally. Unlike renting, loans or cash purchase. Leasing provides enough time for the hotel to make necessary evaluations whether it really needs the bus. In addition, this option is also less expensive because the hotel is given enough time to collect revenue and make necessary payments.
List two additional assets that you could purchase which would appeal to your intended target market(s) mentioned in task 1. Explain and justify your decision.
Since our target market are business personalities and tourists; I would purchase a Jacuzzi and a video game. These individuals travel a lot and need something to relax their minds after travelling long journeys across the world. A Jacuzzi would enable the visitors have a massage without having to leave the comfort of their rooms. On the other hand, video games would engage the visitors mind while they are at the comfort of their rooms. This also entertains them in case they are not interested with normal broadcasting. Video games give them a chance to actually take part in a thinking process and make their stay more comfortable.
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