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Sitxfin 005 Assessment 1 -Short Answers

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Advanced Diploma of Hospitality Management (SIT60316)

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Cambridge International College

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Assessment Tasks and Instructions

Student Name Muhammad Umair

Student Number S

Course and Code

Unit(s) of Competency and Code(s) SITXFIN005Manage physical assets

Stream/Cluster

Trainer/Assessor

Assessment for this Unit of Competency/Cluster Details

Assessment 1 Short Answers

Assessment 2 Project

Assessment conducted in this instance: Assessment 1 2 3

Reasonable Adjustment

1. Has reasonable adjustment been applied to this assessment?

No No further information required

Yes Complete 2.

2. Provide details for the requirements and provisions for adjustment of assessment:

Student to complete My assessor has discussed the adjustments with me I agree to the adjustments applied to this assessment

Signature Date

2 nd Assessor to complete

I agree the adjustments applied to this assessment are reasonable Name

Signature Date

Assessment Guidelines

What will be assessed The purpose of this assessment is to assess your underpinning knowledge to complete the tasks outlined in the

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elements and performance criteria for this unit of competency and relating to the following aspects:

 business objectives relevant to the management of physical assets:

o profitability o growth o providing quality products and services to customers o adhering to:  codes of conduct  environmental sustainability philosophies and practices o industry accreditation schemes

 types of physical assets required by tourism, hospitality and event organisations and the organisation in particular: o buildings o computer systems o equipment fixtures, fittings and furniture in one of the following:  accommodation establishments  commercial kitchens  restaurants and bars  storage areas  tourism, hospitality and event offices  transportation depots o gardens o pools o rides and games o vehicles o vessels

 maintenance requirements for different types of physical assets

 considerations for long-term assessment of physical assets:

o ability to meet business objectives o cost of maintenance over a period of time o customer and staff feedback o input from specialists where required o operational efficiency o safety

 equipment specifications to guide acquisition process:

o budget parameters o environmental sustainability policies for the business o floor plans o numbers and types of required equipment fixtures, fittings and furniture

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This assessment: First Attempt 2nd Attempt Extension – Date: / / RESULT OF ASSESSMENT Satisfactory Not Yet Satisfactory

Feedback to Student:

Assessor(s) Signature(s): Date: / / Student Signature Date: / /

Assessment 1

Your Task:

Answer the following questions below. All questions must be answered.

1. How can the following business objectives influence the methods used for managing physical assets in an organisation? Provide 1 example for each:

 Profitability

If profitability is the major concern then a detailed ROI will need to be conducted, and the total cost will be a significant factor in the decision. In a different situation, a particular asset may be absolutely necessary in order to provide a certain product or service. In this situation the total cost is less important than the function of the asset and ensuring that it remains operational.  Growth

If the objective is for business growth, then any asset purchases and management practices will have to take into account product lifecycle and future usage of the assets. Any new assets must have the capacity to account for the future volume of work or activity required, not just the current level of requirements.  Providing quality products and services to customers

The assets such as furniture and facilities therefore influence the possible rating that can be gained. Basic appointments will result in a lower rating, which will impact on the price that can be put on a room. Spending more and ensuring regular maintenance activities are carried out can result in a higher rating, which will then allow a higher price to be charged. The return on investment again needs to be calculated carefully.

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 Adhering to: o codes of conduct o environmental sustainability philosophies and practices

External influences may also need to be considered when making strategic asset management decisions. Industry Codes of Conduct and Accreditation Schemes may dictate to some degree how decision must be made. For example the Star Ratings Australia Accommodation Classification Scheme covers a wide range of accommodation and consists of ratings from one to five stars in Australia and New Zealand. One star offers clean basic accommodation, while five stars indicate outstanding international standards.  Industry accreditation schemes

When considering a major investment, you will need to conduct thorough research. You will need to justify the expenditure on the basis that it will improve your business. Also, you will need to think strategically in order to prioritise expenditure. While there may be an excellent investment opportunity, if it impacts on your operations so much that your business stops functioning, then it is not worth it. Additionally, you need to realise that many investments can lead to a disruption of operations to some degree, such as an extension to or refurbishment of the premises. The long-term effects must always be weighed up.

2. Provide 8 examples for different types of physical assets required by tourism, hospitality and event organisations:

Responses

Buildings and other structures
Vehicles and vessels
Equipment
Computer and other IT systems
Furniture
Fittings and fixtures
Pool
Recreation equipment, e. pool table, rides and games
Gardening equipment
Maintenance equipment

3. List 5 physical assets relevant to your workplace or training and provide the maintenance details typically required for each:

Physical asset Maintenance requirements

Buildings and other structures

Our guests expect the highest standard of service in

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4. List 6 key aspects which must be considered for the long-term assessment of physical assets in terms of nature of requirements and necessity of acquisition. Who could be typically involved in this in terms of feedback and specialist advice?

Responses

Some types of maintenance will be larger scale operations and will occur much less frequently. Major maintenance works need to be carefully planned. They will take considerable time and manpower and also have the potential to disrupt the regular operation of the business to a large extent. Involvement
Long-term asset maintenance requires well thought-out planning, involving consideration of all the impacts on the business. Often it will require contractors to complete some, if not all, of the work. This means that you, or the maintenance department, will need to work closely with the contractors and supervise the works in order to ensure they are kept to a time limit.

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5. The following are parameters which are used to guide the acquisition of physical assets. Provide examples and details for what should be considered, for each aspect.

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6. Which details need to be recorded in an asset register for each physical asset?

Responses The code number assigned to each asset can be recorded in a bar code fashion, a copy of which can be physically attached to each asset. This allows for easy recording and quick identification of each asset. This scientific recording method helps to prevent theft and improves the efficiency of stocktaking. The asset maintenance register will hold a record of the maintenance history of each asset. This is essential for any warranty claims and also a reporting requirement under WHS laws. The maintenance record should also indicate the next appropriate time for maintenance, e. after 2,000 hours of operation.

7. Provide an overview of the features, advantages and disadvantages of each of the following financing options when acquiring assets:

Hire purchase

Advantages

 Lower capital expenditure meaning a better cashflow situation  Option to purchase item at end of lease  Increased flexibility and opportunity for growth

Disadvantages

 Termination of lease may be costly and/or difficult  Business does not have full control over assets  Maintenance costs on an asset not fully owned by the business

Lease

Advantages

 Lower capital expenditure meaning a better cashflow situation  Avoids risk of fluctuations in market value  Increased flexibility and opportunity for growth  Assets can be returned so no disposal issues exist  Ability to stay updated with latest technology

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Disadvantages

 Termination of these may be costly and/or difficult  Rent can increase significantly at lease-renewal  Business does not have full control over assets  Business misses out on increases in capital gains  Maintenance cost

Purchase

Advantages

 Ownership of asset  Increase of equity  Potential for capital gains  Complete control over assets

Disadvantages

 High risk in acquiring assets  Maintenance costs  Cashflow can be adversely affected

Rent

Advantages

 One-off payment  Low capital outlay  No risk associated with acquiring the asset  No maintenance costs  Tax deductible cost

Disadvantages

 High cost per use  No ownership

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Diminishing Value Method

The second method for calculating the depreciation is the diminishing value method. Using this method the depreciation value changes each year rather than staying fixed. The formula for the diminishing value method is: Depreciation amount = base value X (days held ÷ 365) X (200% ÷ asset's effective life)

This will tell you the amount to depreciate for the FIRST year. For example, if you purchase a car that has a base value of $60,000 at the start of the financial year and it has an effective life of 10 years, then the calculation would be: Depreciation amount (year 1) = $60,000 X (365 ÷ 365) X (200% ÷ 10)

Depreciation amount (year 1) = $60,000 X 1 X 20% Depreciation amount (year 1) = $60,000 X 20% Depreciation amount (year 1) = $12, For the second year you then calculate the final Written Down Value by subtracting the depreciated amount from the original value. This then becomes the base value for the second year's calculation. Written Down Value = $60,000 - $12,000 = $48, To calculate the depreciation rate for the second year you then perform the depreciation calculation using $48,000 as the base value: Depreciation amount (year 2) = $48,000 X 1 X 20% Depreciation amount (year 2) = $48,000 X 20% Depreciation amount (year 2) = $9, The base value for the third year is then $48,000 - $9,600 = $38, 400

9. Go to the ATO website link provided below and source the information for the current simplified depreciation rules which apply:

ato/Business/Income-and-deductions-for-business/Depreciating-assets/Simpler- depreciation-for-small-business/

Responses Assets depreciate for different reasons. The computer equipment depreciates primarily due to technical obsolescence, which means that the technology will be quickly surpassed by newer equipment. Commercial obsolescence occurs when there is no longer a requirement for the asset due to a lack of need for the product or service the asset provided.

The office furniture depreciates primarily due to physical deterioration over the time of its use. The technological advances on office furniture occur at a much slower rate than for computers, therefore obsolescence plays an insignificant role. Pieces of equipment that are in regular use will deteriorate due to wear and tear associated with their use. Dishwashers, espresso machines, forklifts, refrigerators, tractors, vacuum cleaners and porter trolleys all deteriorate as a result of their regular use.

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10. Provide 4 examples of sources for data to enable you to estimate reliable acquisition costs. What does this need to consider in terms of contractual obligations and ongoing maintenance?

Responses

Maintenance staff requirements
Types of maintenance required
Location of maintenance, e. can it be done off-site or away from heavily-trafficked areas
Expected duration of maintenance works

Aspects to consider

The purpose of a maintenance program, or regime, is to keep all areas of the business running smoothly. A TH&E business needs to maintain a certain level of cleanliness and quality appearance that is expected by guests. It must be conducted with minimal disruption to the daily operations and with minimal inconvenience to guests and staff.

11. List 3 examples for environmental sustainability that applies to physical assets and outline the environmental

and financial benefits as applicable:

Example Environmental and financial benefits

 Reducing waste water  Using recycled water  Reducing power usage

Conducting regular maintenance can also be of benefit to the environment. Consider a dishwasher that leaks due to an unsealed crack in the metal. This leads directly to an increase in water usage by the business, which is not only bad for the environment but also bad for the water bill. Not conducting regular maintenance means that the crack goes unfixed, which eventually contributes to the quicker- than-expected replacement of the asset. Again, this affects the environment due to all of the pollution associated with the production of the new dishwasher and also affects the profit margin.

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