Financial And Non-Financial Consequences Of Closing The Restaurant Department At Traditions Limited

Background Information on Overall Marginal Costing

a. Financial and non-financial consequences of closing the restaurant department

It is recognized from the statement of overall marginal costing that the overall loss from the business amounted to £ 8000. Further, the lowest contribution was gained from the restaurant division and the amount was -£ 33,000. However, eliminating the restaurant division will convert the loss of £ 8000 to profit of £ 25,000. Therefore, to increase the profit Traditions Limited can discontinue the restaurant division. However, it is seen that the company is not spending any amount for advertising of restaurant and therefore the sales of the restaurant is lowest as among all divisions (Scott 2015). Further, the French cuisines that seem attractive are sold on such price that does not even cover the cost related to that food. Therefore, the cost of those foods can be increased which in turn will increase the profits of restaurant. If the restaurant is closed Traditions Limited will lose the opportunity of increasing the sales forever. Therefore, instead of closing it the company shall take the steps to enhance the sales through advertising and increasing the menu price.

It has been identified that Claude has great association with the restaurant. Further, the prize own by him gave him confidence regarding his career as a chef. If the restaurant is closed chances are there that he will lose his confidence and may not be able to choose any other profession. Further, he may not be willing to work any 3^rd party’s restaurant as he feel that it will hamper his creativity (Ajodhia 2014). The reason behind this is that he changes the menus in the restaurant in weekly basis; however, if he works for someone else he may not get that must independency there to take these decisions on his own.

b. Management accountant is engaged in the role of accounting for the functions of internal business and tracks all the internal costs required for decision making. Further, she must be familiar with the system of cost allocation to each of the services or goods produced by Traditions Limited. Further, before taking any final decision regarding closing the restaurant, she shall prepare the cost and profit data as far as possible as there is no proper system of managing the stock (Hilton and Platt 2013). Therefore, it can be expected that there is mismanagement of stock. Further, all the record of the restaurant division is maintained through manual system. Therefore, chances are there that the data are misstated or the data presented are not showing the true cost and profit structure of restaurant division. Therefore, the biggest challenge is that she has to gather the cost from the possible sources and then the cost profit statement has to be prepared. Apart from this, she must find out the reason that led to loss in the financial statement of the company as the main concern for the company at present is the loss in the financial statement after having profits for several years of business (Fullerton, Kennedy and Widener 2013).

c. Factors influencing designing and implementation of the management information system (MIS)

MIS enables the companies to get right information in right form at right time through improving the communication among the people of the organization.further, the MIS play major role in organizational life as it delivers appropriate information as per requirement.  For Traditions Limited the purposes of MIS are as follows –

• Information can be retrieved easily
• It creates appropriate conditions for making effective decision that will be appropriate for information processing in timely manner
• Evaluation of the company’s activity and evaluate results for correct deviations
• It helps in predicting the future prospects of company with regard to taking the required precautions in case of defeat in attaining the goal.
• It enables to take the advantages of system through issuance of reports irrespective of the detailed report or aggregate report (monthly, annually or quarterly) based on the activities of the company (Romney and Steinbart 2014).
• Responses to enquiries
• Remember historical information and required information as these are the basis of work.

Further the other factors that lead to application of MIS are as follows –

• Technological factors – in technological aspect MIS helps in improving system quality, service quality and information quality. System quality and information quality are considered the jey factors that have an impact on information system acceptance and the performance of the company. Further, the system quality is the preferable characteristics of the information system.
• Organizational factors – in organizational aspect 2 variables those are suggested are end-user training and top management support. Management support is the perceived level of the general support those are offered by the top management and end-user training is the amount of training offered by computer specialists of the company. Both can be well managed by MIS (Drury 2013).

Therefore, MIS will assist Traditions Limited in proper allocation of work responsibility, management of business data in proper manner and taking proper decisions based on the available information.   

Reference

Ajodhia, W.A., 2014. Master of Business Administration Program In General & Financial Management.

DRURY, C.M., 2013. Management and cost accounting. Springer.

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and control practices in a lean manufacturing environment. Accounting, Organizations and Society, 38(1), pp.50-71.

Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.

Romney, M.B. and Steinbart, P.J., 2014. Accounting information systems. Pearson Higher Ed.

Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.