Responsibility Centers & Financial Controls

Posted: September 3rd, 2013

Responsibility Centers & Financial Controls

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Responsibility Centers & Financial Controls

The purpose of this project essay is to put into consideration Deer Valley Lodge’s revamping project. The ski resort is considering its options in customizing its location with more lifts for its customers. My task was to determine the suitability and contrast between two tax approaches and if the revamping project would prove to be a positive or negative investment.

Before Tax NPV

From the calculations in the excel sheet, if the management decides to employ the pre tax NPV approach, this will prove to be a profitable method yielding 408,953 dollars after deducting all the expenses. Every business aims at making profit (Bhimani, 2008), this approach is a profitable investment, and thus the resort can implement it.

After Tax NPV

If Deer Valley Lodge management decides to implement this approach in their ski investment, my calculations suggest that they will harvest profits amounting 935,438$ dollars. If I compare the two methods of approaching this investment, I would advice the management of the company to implement the after tax NPV approach since it is more profitable (Bhimani, 2008).

Subjective Factors

In accordance with my calculations, one of the subjective factors that would affect this decision is the profits realized from food sales, equipment rent as well as other items customers would purchase from the resort. If the resort should provide additional facilities to complement its services, purchases made would therefore have significant contribution on the net profit. This project will ensure sufficient space for the resorts customers. This means that customers will be more satisfied with the service, and may turn up in larger numbers come the next period (Cadez, 2009). In addition, I also think conditions of the weather would have significant effect on the project. Poor weather would mean poor customer turnout and good weather conditions would attract more customers (Cadez, 2007).

Reference

Bhimani, A., Horngren, C. T., Datar, S. M., & Foster, G. (2008). Management and cost accounting. Harlow [etc.: Financial Times Prentice Hall.

Cadez, S., & Guilding, C. (January 01, 2009). Strategy and strategic management accounting: An investigation of organizational configuration. Programme and Collected Abstracts.

Cadez, S. (January 01, 2007). A configuration form of fit in management accounting contingency theory: An empirical investigation. The Business Review, Cambridge, 7, 2, 220-227.