SITXFIN003 Manage Finances Within a Budget Assessment C

Assessment C – case study (Part 1)

This unit applies to tourism, travel, hospitality and event businesses. While the case study scenario is based on a hospitality business, the principles for managing a budget demonstrated in this assessment are the same in all types of businesses.

Learner assessment guide and evidence

This assessment requires you to manage and report on budgets over a three-month period.

You are required to do the following.

• Complete Tasks 1 and 2 in Assessment C.
• Read the scenarios and answer the questions.
• Round all dollar values to the nearest whole number when calculating financial information; for example, $12.55 becomes $13, $18.22 becomes $18.
• Unless stated otherwise, round all percentages to one decimal point when calculating financial information; for example, 12.55% becomes $12.6%, 18.22% becomes 18.2%.
• All budget calculations can be completed manually or using accounting software or computer-based spreadsheet software, such as Microsoft Excel or Google Sheets.

Case study

The Jackson hotel has a bistro, two bars (public and sports), a drive-through and walk-in bottle shop and TAB situated beside the sports bar.

You are the manager of JJ’s Bistro. It seats 210 people and is open for lunch and dinner, seven days a week. The hotel promotes a family environment and has a playroom for younger children and an activity centre for pre-teens containing electronic and other games. These glass walled areas are within view of customers seated in the rear section of the bistro.

The hotel’s management team develop an operational budget for the business based on previous budgets, anticipated business and any special projects, such as renovations or new products. Each operational area within the hotel is given a departmental budget based on organisational goals and their anticipated revenue and expenses.

Budgets are developed on a quarterly basis. Each department has quarterly and monthly budget targets. Monthly budgets can be adjusted during a quarterly cycle if circumstances within the department change.

The following events have taken place during the April budget period.

• Prices for meat, fruit and vegetables have increased as a result of recent drought in some regions and floods or storms in others.
• Prices for many wines have fallen due to a surplus in the market.
• Beer prices have risen slightly, again due to the drought leading to shortages of ingredients and an increase in government taxes.
• A major wine supplier has been running an in-house promotional campaign, with staff product knowledge training provided to help increase sales.
• The bistro menu changes to the new winter menu on May 1^st. Its introduction is being promoted in April throughout the hotel.

Task 1: Monitor budgets

• Go to your Course files folder and open Assessment C_Budgets.
• Answer all questions based on the contents and outcomes of the Jackson Hotel operational budget – June quarter.

Q1: List the hotel’s financial commitments under their correct cost category. Name at least two commitments for each category

• Variable direct costs
• Variable indirect costs
• Fixed indirect costs

Q2: Name the top four cost categories the business has allocated the most funds too in this budget period.

Q3: Why have significant funds been allocated to these categories?

Discuss their importance to the business and consequences if inadequate funds are allocated.

Q4: Using the same Course file Assessment C_Budgets go to the Bistro departmental budget – April.

You are holding a team meeting to discuss the financial targets provided in the organisational and April bistro budgets.

What information do you need to communicate to the team to ensure they understand the targets and goals to be achieved?

Q5: What techniques can you use to promote awareness of methods of controlling costs or increasing sales so you can achieve budget targets?

Task 2: Calculate variances

• Go to your Course files folder and open Assessment C_Budgets.
• Complete the comparative analysis report for the Bistro departmental budget – April by calculating all missing dollar value and percentage variances.
• Complete the Favourable/Unfavourable column by indicating if the budget results are favourable (F) or unfavourable (UF) for the business.
• Save the completed Assessment C_Budgets locally to your computer.
• Submit the budget to your assessor once completed.

Task 3: Question and answer

• Answer all questions based on the budget outcomes in the completed April budget comparative report in Task 2 and case study information.

Q1: Are there any significant variances in the sales figures that you should be concerned about? Explain what the results indicate and why you are/are not concerned about them.

Q2: Are there significant variances in any of the expenses categories that you think should be investigated further? If yes, discuss which categories and why you think they need investigation. If no, discuss why the deviations do not warrant investigation.

Q3: Based on your responses to questions 1 and 2, what is your overall evaluation of the budget results? Is the bistro meeting its financial targets?

Q4: Which expense category has the most funds allocated to it? Explain why it is important you manage costs in this category carefully.

Q5: Using the results and information obtained from the April comparative report, your answers to the previous questions and the background information, write a transcript of the outcomes of your report ready to deliver to the bistro staff at the next team meeting. The transcript should include the following information.

• The current status of the budget; is the work area meeting its budget targets, is it on track to meet June quarter budget targets?
• Which areas are underperforming or performing better than expected?
• What changes, if any, need to be made to help the team meet next month’s budget targets?
• An outline of budget targets for May.
• Organisational factors that contributed to the setting of these targets.