Question

The business world is living in a globalization era and it is now facing even more crisis, challenges and obstacles which are quite alarming and felt by several countries due to the impact of the coronavirus outbreak. In Mauritius as well, the pandemic is having a big impact on the survival of many enterprises. They find themselves in huge financial difficulties caused by constraints on the supply side due to disruption of distribution during the pandemic Covid19 and this weakness further depresses demand-side sustainability of enterprises in the country. To maintain the sustainability of a business's life in the face of present economic conditions, this requires good managerial skills. Management requires to coordinate all available resources effectively and efficiently and make managerial decisions to support the achievement of the company in maximizing profit. You are the Cost Accountant of Hibiscus Hotels Ltd, a medium- sized company with three 3* hotels operating in the north of Mauritius. The majority of the hotels’ clients are from France and Italy. You have been informed that there is a surge in number of local covid-19 cases currently; the country’s border is closed and will be re-opened to foreigners only in twelve months’ time. The following information has been extracted and provided to you: Hibiscus Grand bay Hibiscus Pereybere Hibiscus Grand Gaube Number of employees 34 20 18 Rent of premises per month Rs 150,000 Rs 80,000 Rs 50,000 Indirect Labour per month Rs 200,000 Rs 170,000 Rs 110,000 Administrative overheads per month Rs 28000 Rs 19,000 Rs 12,000 Travelling cost of staffs per month Rs 35,000 Rs 27,000 Rs 12,000 Advertising cost (yearly) Rs 30,000 Rs 25,000 Rs 15,00

Distinguish between a committed cost, a controllable cost and a variable cost? Give an example of each relevant to Hibiscus hotels. [6 marks] b) The CEO of Hibiscus Hotels Ltd is of the opinion that if there are no customers, there won’t be any operational costs for the hotels in the upcoming twelve months. How far do you agree with the company’s CEO? [12 marks] c) Briefly explain the different strategies that Hibiscus Hotels Limited may consider to reduce its fixed costs in the long run?