Ali has worked as the Catering Manager for Bright Star University for several years. As all accounting and reporting had been managed centrally, budget responsibility had not been part of the requirements of the role. Targets for meal numbers were the only objective set and all meals had a standard recipe and varieties were rotated monthly in a fixed pattern for example, every third Thursday was vegetable lasagne. Ali has 2 supervisors as support.

However, a new senior management team have been appointed and a restructuring has taken place at Board level which has resulted in a new budget management system being introduced. No consultation has taken place and the new system has been imposed with immediate effect. Ali has received the following instructions and information:

Bright Star University

To: Department Manager: Catering

From: Head of Management Accounting

Re: Budget Sept 2022-23

As you are aware, the University is going through a programme of change and a new budgeting system is being introduced. With immediate effect you will be responsible for the costs and revenues associated with your area of responsibility. The budget that has been set for the accounting year Sept 2022-23 is shown below. Reporting will be quarterly. This new system of control is to be part of the new culture of the University.

You will be provided with a quarterly performance report comparing actual revenue and expenditure to the original budget. Any variation from budget will require investigation, after which you will need to prepare a report detailing explanations for the variations to myself within ten working days of the issue of the performance report. A plan will also be required outlining corrective action to be taken.

Thank you for your assistance.

A Bean ACCA

Annual Budget: Sept 2022-23: Catering

Meals produced	135,000
Revenue	880,000
Expenses:
Ingredients	340,000
Manager & supervisor costs	90,000
Staff costs	105,000
Heat & power	11,000
Cleaning materials	3,000
Depreciation	25,000
Pans & utensils	2,500
Crockery & cutlery	1,500
Allocated central overheads	125,000
Profit	177,000

No calculations are required in your answer for Question 1.

Required:

1. Using the different purposes of a budget as a basis for your evaluation, evaluate the new budgeting system being introduced.

(7 marks)

2. Make recommendations as to how the new budgeting process should be improved.

(7 marks)

3. Using the Catering Department as an example, evaluate how the principles of Beyond Budgeting could be implemented at the University instead of the traditional budgetary system. Consider any issues that may arise.

(6 marks)

(TOTAL 20 Marks)