Importance of Cost and Volume in the Financial Management - Carnival Plc

TASK 1

P 1.1 Importance of cost and volume in the financial management of Carnival Corporation and Plc.

Importance of Costs: Costs play an essential role in terms of computing profitability and expenses of the business. Costing of each activity must be added in the financial report of to examine exact functionalities of the environment (Adora, 2010). Costing is essential for each business in order to compute their expenses and profitability within business environment in a respective manner. Various types of costing are associated with travelling business which are as follows:

Direct costs: Direct costing are those costing which is directly associated with each operational activities which is being associated with the costing of production. Varied of direct costing are associated with Carnival Corporation and Plc. Organisation, which could be administration expenses, depreciation etc. all these issues must be associated with the help of some areas where something new development can be gained in relevant form.

Indirect costs: Indirect costs are those costing which is concerned with several types of fixed and variable costing of the business (Eagles, 2014). Within Carnival Corporation and Plc. Business, multiple types of indirect costing can be for travelling businesses can be, advertising expenses. Maintenance of business, security expenses, supervision etc. all these exercises convey wide range of expenses for the firm.

Break even analysis: Break even analysis might be utilised by Carnival Corporation and Plc. Business manager in terms of making comparison of total variable costs to fixed costs for total sales revenue of enterprise for examining sales volume of the business in industry. With the assistance of the break even analysis approach, in order to getting desired profitability within attaining financial goals and objectives properly.

Economies of scale: Economies of scale that can be used by Carnival Corporation and Plc. Managers in order to reducing costs per unit that arisen from increased total output of product. So it can assist the business to boosting up production volume of the business and also lower per unit costing can come up from bulk orders from suppliers (Goswami, Mattoo and Sáez, eds., 2012). So economies of scales stage gaining is crucial factor for the firm in context of getting desired profitability and revenue generation of the travelling business. Its managers need to must maintain economy of scale.

P 1.2 Analyse pricing methods used in the travel and tourism sector

Pricing methods: Various types of pricing methodologies can be utilised by Carnival Corporation and Plc. Managers in order to ascertaining the profitability level and also generating high range of revenue from the marketplace in respective form. Pricing approaches must be utilised by the business managers in terms of accomplishment of desired profitability within the industry efficiently.

Cost led: Cost lead pricing method must be associated with its several types of travelling, accommodation and cruise services which is being furnished by the company in industry. Cost leading pricing method defines that, overall costing and expenses during production and services phases, must be involved with proper margin of the company so they will be able to gain desired and targeted profitability within business environment (Harris and Mongiello, 2012).

Market led: Market leading is one of the crucial factors of pricing method which must be utilised by Carnival Corporation and Plc. Organisational managers within its pricing strategy in order to gaining competitive advantages in industry (Buckley, 2012). Financial managers of the firm require to analysed the market leading travelling companies which is accessing the specific costing for such kinds of accommodation and cruise facilities within business environment

Marginal costing: This types of pricing can be examined by Carnival Corporation and Plc. Business managers, where the business has been reached to break even point of the firm (Hughes, 2013). Marginal costing is concluded some essential types of costing which can be, direct material costs, direct labour costs, direct expense and variable production overhead costing etc. all these costing must be computed within marginal costing approaches costing system in context of identifying their proper profitability and losses of the enterprise.

Return on investment: This is also an effective approach of costing examination, which can be used by Carnival Corporation and Plc. Financial managers in order to measuring performances of the business that could be utilised to evaluated the efficiency of an investment or compare the efficiency of a numbers of different investments within the business. The outcomes of return on investment can be displayed in the form of percentages or ratio.

Absorption costing: Absorption costing can be implemented by Carnival Corporation and Plc. Managers in order to examining the manufacturing costs are absorbed by the units of produced (Massidda and Mattana, 2013). It has been seen that, numbers of finished unit in inventory including the direct materials, direct labour and both variable and fixed manufacturing overhead costings. All these costing must be included within the business environment with respect of identifying expenses and profitability of the business efficiently.

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