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Hi Dear Tutor, I have some questions
The weekly revenue per guest is $2000 in the 20×7 budgetm the 20×7 actual results and the 20×6 actual results which is not line with inflation
20×7 budget=4000000/2000=2000
20×7 actual results=3920000/1960=2000
20×6 reulst=3880000/1940=2000It appears that revenue per guest has not been adjusted for inflation so showing in real term not in nominal term so i understood here
However all staff costs have increased by 2% which is caused by inflation
maintenance from 20×6 to 20×7 (480000-470588)/470588=2% which is the result of inflation
service from 20×6 to 20×7=(960000-941176)/941176=2% which is the result of inflationit appears that increase from one year to another year is the outcome of inflation which is also understandable
Coming to repairs I faced some problems in understanding
The repair costs allowing for inflation have been set at the same level as 20×6
Repair costs 196078 in 20×6 and 160000 in 20×7 actual results and 20000 budget in 20×7. Despite there is decrease in repair costs has its inflation been included in the amount of 20×7 repair cost?
The terms nominal and real have no relevance at all in Paper PM – they are not relevant until Paper PM!!!
The figures given in the question are the amounts that actually happened.
The general rate of inflation is 2%. Do you really think that means that all companies will automatically increase their price by 2% a year? They might increase them by more or they might increase them by less.
The relevance is only for the discussion part of the question – have prices gone up by more or less than inflation.
Dear Tutor I am not saying real and nominal terms are part of the PM.
if the price is stable and unchanged in the given years meaning that the revenue per guest has not been increased as inflation did?
from my calculation showing that the percentage rose in those categories were in line with the inflation, then is it?
The repair costs allowing for inflation have been set at the same level as 20X6-how it has been determined the same as 20X6 since the actual result in 20X7 is 160000$ and budget figure in 20X7 is 200000$ ?Well i understood the figure in the question underwent inflation but from which yardstick it says it set at the same level as 20X6?
But it was you who mentioned real terms and nominal terms in your question, and they are meaningless for Paper PM.
If the price has been unchanged then they have not inflated the prices,
You are told the actual results for 20X6 and 20Xy and your job is to discuss whether or not they are achieving their objectives,
One factor you will mention in your answer is whether revenues and costs have increased by more or less than the general rate of inflation, but the marks are for the discussion – they are very few marks for calculations.Read the examiners answer to see the sort of discussion that was required.
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