SITXFIN003 Manage Finances Within a Budget Assessment D

Assessment D – case study (Part 2)

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 calculate and report on budget deviations.

You are required to do the following.

• Complete Tasks 1, 2 and 3.
• Read the scenario and answer the questions.
• Any budget calculations can be completed manually, using account software or computer-based spreadsheet software, such as Microsoft Excel or Google Sheets.

Case study

JJ’s Bistro is located in Jackson’s hotel. 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 play areas are within view of customers seated in the rear section of the bistro.

The following events took place during the May 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 glut in the market.
• Beer prices have risen slightly, again due to the drought leading to shortages of ingredients and an increase in government taxes.
• Most utility companies increased prices by 7% at the start of May.
• The local police started a blitz on drink driving in the middle of May with increased police presence in local suburbs and roadside testing of drivers.
• In-house training was provided to key food and beverage staff in April by a coffee supplier. The aim is to increase sales and the quality of coffee served. The training was free of charge as part of a new preferred supplier contract with the coffee supplier.
• A major wine supplier has been running an in-house promotional campaign, with staff training provided to help increase product knowledge.
• The bistro menu changed to the new winter menu on 1 May 20XX. It was heavily promoted in May throughout the hotel and in local community newspapers.

Task 1: Interpret budget results

• Go to your Course files folder and open Assessment D_Bistro May budgets.
• Evaluate the budget outcomes and their impact on the operation and financial goals of the bistro.
• Answer all questions based on the outcomes in the comparative analysis report, Bistro purchasing budget – May and the case study information.

Q1: Discuss how the outcomes food and beverage sales and costs of sales indicated in the May comparative analysis report impact the bistro area and the business overall. Consider the types of deviation (positive or negative) and size of the deviations in food, beverage and total sales and cost of sales categories.

Q2: What are two possible explanations for the deviations in food costs and beverage costs? Consider information provided in the May purchasing budget as well as the comparative report and case study information.

Q3: When preparing the budgets, the hotel forecasted food costs as 37% of food sales and beverage costs as 30% of beverage sales.

Is the bistro meeting organisational goals for cost of sales? What is the difference between the budget target and actual results?

• Food purchases
• Beverage purchases

Q4: Should these deviations be reported to management? Explain why/why not.

Q5: Based on the May purchasing budget, in what categories are the largest food and beverage cost deviations occurring?

Task 2: Investigate option to improve performance

The food and beverage manager is very concerned about the food and beverage purchasing and cost of sales results. They want the bistro team to make it a priority to meet budget targets for cost of sales in June. Management then plan to reduce budget allocations for food and beverage purchases in the September quarter budget. It is an organisational goal to reduce cost of sales to below the current percentages of 37% food cost and 30% beverage cost. To meet June and September quarter budget targets, new methods of managing costs must be investigated.

• Go to your Course files folder and open Assessment D_Bistro May budgets.
• Answer all questions based on the outcomes in the comparative analysis report Bistro departmental budget – May, Bistro purchasing budget – May and case study information.

Q1: List four options for managing costs that could be applied to this situation.

Q2: You have decided to source new fruit and vegetable and seafood suppliers. Describe how you would investigate if changing suppliers is a viable option for reducing your cost of sales. How will you obtain information to determine if prices and product quality from alternate suppliers are appropriate for your operation?

Q3: You need to investigate which current suppliers have increased prices for products and services, how much prices have risen and how much of the business’s financial resources are allocated to existing suppliers.

What organisational financial documentation will provide this information?

Q4: Your research has revealed that a number of other suppliers can supply similar quality items at cheaper prices than your current supplier. Describe what you would discuss with your current supplier before making a decision.

Q5: Who would you consult with before implementing any changes to the hotel’s suppliers of fruits and vegetable and seafood products?

Task 3: Role-play

• You are required to participate in a role-play to communicate with the current seafood supplier of the Jackson’s Hotel.
• Role-play is to be conducted in an actual or simulated workplace environment.
• The role-play can be conducted as a face-to-face meeting, via telephone or online video conferencing tool such as Skype, Hangout or Zoom.
• All participants must be briefed on their roles and desired outcomes of the role-play prior to commencing the activity.
• Role-plays can be recorded for further analysis and discussion with the consent of all participants.
• Complete the role-play.
• Your assessor will observe you as you complete this task.
• Answer all the questions.

Background information

The chef orders the following types of seafood for JJ’s Bistro.

Learner instructions

Prior to completing the task, you are required to:

• Go to your Course files folder and open Assessment D_Seafood price list.
• Complete the table below to calculate how much is spent over a weekly and monthly period on seafood in the bistro. Then calculate what percentage of the May food purchases budget is spent on seafood. This will help you gain an understanding of the impact changes to prices could have in the food purchases and bistro budget.
• Your calculations are not an assessment task and do not have to be submitted to your assessor however, it is recommended you ask your assessor to check your calculations.

During the role-play, you are required to demonstrate the following skills and knowledge.

• Discuss techniques to reduce costs with an existing supplier to inform and assist in the management of organisational budgets.
• Use oral communication skills to discuss budget requirements and seek and provide feedback.

Potential topics to discuss venue/site personnel

These are suggestions only. You can choose what topics you discuss and questions you ask the supplier to achieve the desired information. Your discussion should be based on budget analysis and case study information provided in Assessments B and C. You can develop your own questions or modify those provided. Discuss your topics or questions with your assessor prior to commencing the role-play.

• Discuss current pricing structures for prices and quotes you have received
• Discuss organisational goals
• Discuss current and future business relationships
• Are prices likely to increase/decrease in the next few months?
• Can you estimate how much prices might rise/fall? On which items?
• Are the reasons for the increases/decreases in prices likely to have a short- or long-term impact?
• Negotiate new pricing schedules for products

Task 4: Improve budget performance

• Go to your Course files folder and open Assessment D_Bistro May budgets.
• Read and interpret the information and outcomes contained in the Bistro labour budget – June quarter.
• Evaluate their impact on the operation and financial goals of the bistro.
• Answer all questions based on the labour comparative analysis report, staffing and case study information.

Q1: Complete the table below by inserting the variance percentage for each category in each month.

Q2: What do these statistics tell you about the bistro’s performance for the June quarter? Explain what the variances mean and how this affects the department’s ability to meet its financial goals.

Q3: Management think one reason for high bistro labour costs is the department is consistently overstaffed; more staff than necessary are rostered on for most service periods. Rosters have been reviewed and new staffing levels suggested for front of house and kitchen areas. The number of customers served and sales revenue is expected to remain relatively stable in the near future.

Review the bistro’s current and revised staffing levels in Bistro staffing levels table in Assessment D_Bistro May budgets.

Discuss the impact these changes could have on customer service levels, your team and budget targets. Consider both positive and negative outcomes.

Q4: What payroll documentation can you use to maintain detailed records and monitor funds allocated to labour costs during the budget period?

Q5: During the initial investigation phase, with whom would you discuss the reasons for changes to rosters and the desired outcomes of the changes?

Q6: You believe the changes will have a negative impact on customer service standards and food quality, leading to an increase in customer complaints. This could lead to lower customer numbers and sales revenue over the next year.

You want to present your concerns to management and recommend smaller cuts to staffing levels, especially to the front of house team during the busiest periods. Your suggestions include better management of hours worked by casual staff and a review of service procedures to streamline work practices.

Prepare a transcript of your recommendations to be presented to management at the next management meeting.