SITXFIN003 Manage Finances Within Budget

Task summary

• You are to answer all written questions.

Resources and equipment required to complete this task

• Access to textbooks and other learning materials.
• Access to a computer, printer, Internet and applicable software (eg Microsoft Office).

When and where do I need to complete this task?

• This task may be done in your own time as homework or you may be given time to do this task in class (where applicable).
• Your assessor will provide you with the due date for this assessment.

What do I need to submit?

• Your answers to each question in this task.

Instructions

• This is an open book test – you can use your learning materials as reference.
• You must answer all questions in this task correctly.
• You must answer the questions bytyping your answers in Microsoft Word or a similar program. Ensure the answers are numbered to correspond with the question numbers. Your assessor will advise how to submit this assessment task.

Question 1

• Provide an outline of what a master budget is and what it contains.

Question 2

• Identify the four basic financial reports and outline their purpose and content.

Question 3

• Provide a brief summary of the purpose of each of the following budgets:
• Cash/Cash flow budget
• Departmental budget
• Event budget
• Project budget
• Purchasing budget
• Sales budget
• Wage budget.

Question 4

• Identify the purpose of the following financial records:
• Bank deposit documentation
• Bank statements
• Banking summaries
• Business Activity Statements
• Cheque books
• Credit card transaction statements
• Journal entries
• Labour and wages reports
• Merchant statements
• Merchant summaries
• Transaction reports.

Question 5

• What are the requirements for a tax invoice in Australia?

Question 6

• Research three common accounting software applications that small businesses use and summarise their functions and features.

Question 7

• Describe three techniques commonly used for making estimates of expense budgets.

Question 8

• Identify and outline the steps in the accounting cycle.

Question 9

• Give three examples of negative changes in the internal organisational environment which may have to be taken into account when reviewing budgets with a view to making necessary changes.

Question 10

• Budget formats can vary between organisations and accounting programs: list two ways a negative situation can be indicated in figures on a budget.

Question 11

• Discuss the role of a budget and financial reports for a business.

Question 12

• Discuss how changes in legislation can impact on a budget. Give three examples of legislation changes in the last decade that have had an impact on the hospitality industry and the profitability margins.

Question 13

• Discuss how a hospitality business might manage and recover their profit margin in a downturn in the economy.

Question 14

• Identify five internal sources of information that may be used as a basis for preparing a budget and forecasting income and expenditure.

Question 15

• Identify five external sources of information that may be used as a basis for preparing a budget and forecasting income and expenditure.

Question 16

• Identify and briefly summarise the four stages of a budget cycle.

Question 17

1. Define the following options and approaches to budgeting:

• Incremental budgeting
• Zero-based budgeting.

1. Why are ‘rolling budgets’ useful in the hospitality industry?

Question 18

• Complete the following table to differentiate between the ‘top down’ and the ‘bottom up’ approach to negotiating budgets.

Question 19

• Aside from income and expenditure, list seven different types of financial factors/results that may be forecasted in a hospitality budget and actuals reported.

Question 20

• Food wastage is an unknown cost in Australia. One thing for sure that we know is that the cost is escalating quickly. Explain what a restaurant might calculate or consider in relation to waste when preparing financial and statistical reports. Give three examples.

Question 21

• Explain what yield management is in relation to a hotel. Why is yield management important?

Question 22

• Forecasted room revenue calculations are based on the number of rooms available, the number of operating days, the average room rate and the forecasted occupancy. Calculate the room revenue (to the nearest dollar) using the data in the table below.

Question 23

Working out how much to charge for food and drink.

1. Calculate the cost of a drink of vodka and soda (before taxes):

• You will need the following to make one drink - 0.03L of vodka, 0.1L of soda, 0.02 kg of lime and one straw.
• A litre of vodka costs $12.00, a litre of soda water costs $1.00, a pack of 140 straws costs $3.00 and 1kg of limes is $2.00. If 0.03L of vodka costs $0.36 work out the cost of the soda water, slice of lime and one straw.

• What is the cost of the drink (ingredients only)?
• If you wanted to make 500% on the drink how much would it be?

1. What other costs may you have to calculate into the cost of this drink? List three suggestions.
2. If half of the bag of limes were thrown out after being cut and not used, what is the cost of the waste?

Question 24

• What are the three different ways that a statistical/financial report can show variances?

Task summary

• For this task you are required to answer the questions to demonstrate your knowledge of:
• Reviewing and monitoring financial activity against a budget and recommending solutions to deviations.

Resources and equipment required to complete this task

• Access to textbooks and other learning materials.
• Access to a computer, printer, spreadsheet and word processing software.

When and where should the task be completed?

• This task may be done in your own time as homework or you may be given time to do this task in class (where applicable).
• Your assessor will provide you with the due date for this assessment.

What needs to be submitted?

• Your answers to all questions.

Instructions

• Read the case study below and answer all questions correctly.

Question 1

• Use a spreadsheet program to calculate and facilitate the development of final figures for Property 1 as follows:
• Calculate the dollar deviations for room sales, food sales, liquor sales, wages, rent and overheads.
• Calculate the percentage deviations for room sales, food sales, liquor sales, wages, rent and overheads.
• Indicate if the identified deviations are positive or negative.

Question 2

• Use a spreadsheet program to calculate and facilitate the development of final figures for Property 2 as follows:
• Total the budgeted and actual sales for the 6 months.
• Calculate the dollar deviations for sales on a month-by-month basis.
• Calculate the percentage deviations for sales on a month-by-month basis.
• Calculate year-to-date budgeted totals for sales on a month-by-month basis.
• Calculate year-to-date actual totals for sales on a month-by-month basis.
• Calculate the dollar deviations for YTD figures on a month-by-month basis.
• Calculate the percentage deviations for YTD figures on a month-by-month basis.

Question 3

• For Property 1 suggest four possible causes for the variation in room sales.

Question 4

• For Property 1 suggest four possible ways to manage the variation in room sales.

Question 5

• Identify four possible causes of the results for food sales in Property 1.

Question 6

• There is no need for you to investigate the ‘wages’ deviance: why might this be so?

Question 7

• In late June Property 1 undertook a major advertising campaign that had been factored into budgets for July: given the actual results for July, what action might you suggest to management?

Question 8

• Why would you want to conduct a major investigation into sales for September?

Question 9

• The organisation has found out that other businesses in the chain had shown a 6% positive variation in actual sales against budgeted revenue figures: list three suggestions on what might you do about this?

Question 10

• How might you research internal factors impacting the figures you have been given? Give three suggestions.

Question 11

• What could you do to research external factors impacting the figures you have been given? Give five suggestions.

Question 12

• List five internal source documents that you would need to refer to in order to determine profit performance for the food and beverage areas.

Question 13

• Which colleagues and managers might you need to share these findings with? Give five suggestions.

Question 14

• You briefly consider reducing staff numbers as a way of improving profit but reject the idea: what reasons might be behind this thinking?

Task summary

• You are to answer all written questions.

Resources and equipment required to complete this task

• Access to textbooks and other learning materials.
• Access to a computer, printer, Internet and word processing software (eg Microsoft Word).
• Calculator or spreadsheet application.

When and where do I need to complete this task?

• This task may be done in your own time as homework or you may be given time to do this task in class (where applicable).
• Your assessor will provide you with the due date for this assessment.

What do I need to submit?

• Your answers to each question in this task.

Instructions

• This is an open book test – you can use your learning materials as reference.
• You must answer all questions in this task correctly.
• You must answer the questions bytyping your answers in Microsoft Word or a similar program. Ensure the answers are numbered to correspond with the question numbers. Your assessor will advise how to submit this assessment task.

Question 1

• Calculate Cost of Goods sold for a bar given the following information:
• Opening stock for the bar: $30,000
• Closing stock for the bar: $25,000
• Requisitions to the bar: $125,000

Question 2

• What is the Percentage Cost Factor for the following?
• Cost of Goods Sold: $17,800
• Revenue: $41,786.

Question 3

• What is the Gross Profit for the following?
• Cost of Goods Sold: $55,962
• Revenue: $134,000

Question 4

• Calculate Percentage Mark-Up for the following:
• Revenue: $15,000
• Cost of Goods Sold: $6,934

Question 5

• What is the Return on Proprietor’s Funds given the following?
• Owner’s funds: $1,200,000
• Nett profit: $365,500

Question 6

• Calculate Current Asset Turnover Ratio (expressed as a percentage)from the following:
• Average current assets: $2,000,000
• Sales: $350,680

Question 7

• What is the Gearing Ratio based on the figures below (expressed as a percentage)?
• Average liabilities: $450,999
• Average equities: $2,150,000

Question 8

• Calculate the Working Capital Ratio for the following:
• Current assets: $805,000
• Current liabilities: $1,450,000

Question 9

• What is the Quick Asset Ratio (expressed as a formula) for the following figures?
• Current assets: $2,000,000
• Stock: $55,000
• Current liabilities: $1,300,000
• Bank overdraft: $45,000

Question 10

• What is the Proprietary Ratio (expressed as a percentage)given the following?
• Total proprietorship: $375,000
• Total assets: $1,500,000

Question 11

• Calculate the gross profit margin percentage for the figures below:
• Sales: $ 2,457,983
• Gross profit: $890,816

Question 12

• Calculate room occupancy percentage from the following:
• Total rooms available: 1205
• Rooms occupied: 378

Question 13

• What is the average room rate for the following?
• Room revenue: $66,450
• Total rooms available: 524

Question 14

• The following ratios are used to judge the financial stability of a business: identify if the following are used to determine the short- or long-term financial stability of a business.

Question 15

• If your working capital ratio went from 2 to 1, would that generally be seen as a positive or negative movement?

Question 16

• Your gearing ratio has moved from 0.5 to 1.0: is that generally regarded as a Positive or Negative movement?

Question 17

• Your analysis of labour costs indicates negative deviations: what might you suggest to improve this situation?

Task summary

• For this task you are required to prepare and manage a budget over three months and prepare financial reports.

Resources and equipment required to complete this task

• Access to textbooks and other learning materials.
• Access to an accounting software package (your assessor will provide information for access to free software).

When and where should the task be completed?

• This task may be done in your own time as homework or you may be given time to do this task in class (where applicable).
• Your assessor will provide you with the due date for this assessment.

What needs to be submitted?

• Part A – Email and draft budget for B&B managers’ discussion.
• Part A – Memo and draft budget for discussion and approval from Betsy.
• Part B – Memo and final budget.
• Part C – Memo.
• Part D – Email communication with supplier.
• Part D – Memo to Betsy.
• Part E – Cash flow report and memo.
• Part F – Memo.

Instructions

1. You will now meet with Betsy (role played by your assessor). She will provide you with the instructions for preparing your budget and allocating costs.

You will be required to actively participate in the meeting and take notes on the detail provided (by your assessor in the role of Betsy). Have this assessment work sheet with you to record the details and be prepared to ask questions to clarify the information provided.

Your assessor will give you details on when this meeting will be held.

In the meeting, you will need to confirm (take notes as required) the following:

1. What budget you are responsible for.
2. The increases Betsy has directed you to include into the projected income budget for the next year.

• Accommodation
• Food prices
• Beverage prices.

1. Betsy will also give you some extra considerations during your meeting. Make note of them:
2. Betsy has also provided you with the following expenditure information that you will need to consider when preparing your cash flow budget. This data has been sourced from historical data, committed costs for the B&B and Marino Enterprises policy:

• Marino Enterprises’ overheads are $2000. All individual businesses and departments pay this overhead in August of each year.
• Lease payments are $1,500 monthly.
• Combined insurance coverage to increase to $1,400 per year paid in two equal payments in March and September.
• General repairs and maintenance to the property of $4,800 pa to be budgeted monthly.
• Digital marketing and advertising costs will be $2,400 pa, payable monthly.
• Charges for out-sourced laundering is $800 per month.
• Electricity charges are payable every quarter as follows:
• September: $2,200
• December: $2,000
• March: $2,400
• June: $3,000.
• General monthly miscellaneous expenses amount to $600/month.

You also know from your experience and the management of the property that:

• You need to replace some linen and towels at the cost of $2000 and replace kitchenware consumables to the value of $1000 at some point in the year. You will need to decide when it is best to include this expenditure in your budget along with an explanation to Betsy as to why you think it is best budgeted for in those months.
• The monthly cost of F&B stock is predicted to run at 40% of the food and beverage sales. You will need to calculate this cost into your projections.
• The cost of labour is calculated at 25% of all monthly sales. You will need to calculate this cost into your projections.
• Betsy has asked you to enter the income and expenditure data she has given you plus your projections into your accounting system to prepare the draft revenue budget for the upcoming year. You may use an accounting software package or alternatively you could use a Microsoft Excel (or similar software) spreadsheet. If you use spreadsheet software make sure you use the headings: income, cost of sales, gross profit, expenses and operating profit. Enter the data with 0 decimal places.

1. Prepare an email that you can send to the other managers at the B&B, and John Marino seeking their input and feedback. Attach your draft budget and ensure that you provide them with enough information so that they can make a judgement of how and why you have allocated funds as you have. Submit this email to your assessor as if they were one of the managers.
2. Print a copy of your draft budget and submit it to your assessor (in the role of Betsy) along with a memo explaining:

• the extra expenditure for discussion and approval (beds and kitchen appliances)
• a discussion on the internal and external factors that could have an impact on the budget. Discuss at least three internal and three external factors.

1. Provide at least three recommendations for changes to the budget that will satisfy Betsy’s requests in a memo. It is your responsibility to meet the budget so you can choose to make recommendations to increase income, decrease expenditure wherever you see fit or even negotiate not to make any changes to the expenditure.

Make the changes to your budget in the accounting software. Produce a final budget report and submit it to your assessor along with a memo outlining the changes you have (or have not) made with an explanation justifying your decisions. In your justifications include the advantages and disadvantages of accepting your changes. Submit your memo and report to your assessor by the due date.

1. Work with one other student in the roles of manager and short order cook to discuss the final budget, explain what their role is in terms of financial management (to stay within the budget, save money where possible) and together come up with a list of at least four recommendations to reduce the costs.
2. Write a memo to your assessor with your recommendations for reducing the cost of the menu. You will need to make sure that your recommendations do not have an impact on the level of customer service and the B&Bs reputation for exquisite breakfasts.

1. Enter the above budget income and expenditure amounts for July and August to produce a suitable report.
2. Draft the communication with the supplier outlining your request and ask them to provide you with the best possible pricing structure. You will also need to influence their decision by reminding them that the B&B wants to stay with local producers and their quality is the best. Your communication should be formatted professionally and written clearly and in a suitable language for the audience. Submit this communication to your assessor.

3. Draft a communication to Betsy regarding your evaluation of the budget – how you are feeling, how in your effort to reduce expenditure, this has caused a slump in customer service, your recommendations for changes to the budget and the impact that the changes will have – positive and negative. You will need to influence Betsy so ensure you demonstrate that your month-to-date actuals are ahead of budgetand how you are saving money. Include your report in your communication to Betsy.

Use the information above to update the budget in the blank cells.

2. Create a report outlining the cash flow and submit it to your assessor with an explanation of how you might recover from the deficit this month. Make at least two recommendations for cash recovery in September/October.

1. What sources of information might you need to set realistic projections for the rest of the year, including finding out more information about what is coming up in the region? Make a list of at least four people or places you could seek information from.
2. Identify at least three solutions for the income slump. The solutions should concentrate on increasing income and revenue rather than on reducing expenses.
3. Write a memo or email to Betsy and the Cook at the B&B outlining the answers to the above questions and including a discussion aimed at the cook about the importance of meeting budget restrictions, what the cook should do if they are having trouble meeting the budget or find it challenging keeping relationships with suppliers. Submit your memo to your assessor in the role of Betsy.