Reference + case study description: (Questions available below)

SITXFIN003 Manage Finances Within a Budget

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 1st. Its introduction is being promoted in April throughout the hotel.

A comparative analysis report for the Bistro departmental budget has been done, resulting in the following table

Comparative analysis report

Bistro departmental budget - April

	April	Favourable / Unfavourable	May	June quarter
	Budget	Actual	Variance	Variance	Budget	Budget
	$	$	$	%		$	$
Revenue
Food sales	105,120	119,837	14,717	14	Fav	114,975	328,500
Beverage sales	89,250	96,390	7,140	8	Fav	91,875	262,500
Total sales	194,370	216,227	21,857	11.2	Fav	206,850	591,000
Cost of sales
Food purchases	40,953	45,048	4,095	10	Un fav	42,194	124,100
Beverage purchases	27,563	30,043	2,480	9	Un fav	26,775	78,750
Total cost of sales	68,516	75,091	6,575	9.6	Un fav	68,970	202,850
Gross profit	125,854	141,136	15,282	12.1	Fav	137,881	388,150
Expenses
Advertising/Promotions	780	624	(156)	(20)	Fav	962	2,600
Cleaning contractor	1,490	1,490	0	0	As expected	1,490	4,471
Small equipment replacement	333	393	60	18	Un fav	333	1,000
Laundry	245	232	(13)	(5.3)	Fav	245	735
Maintenance	1,493	1,262	(231)	(15.5)	Fav	1,493	4,480
Printing & stationery	160	195	35	21.9	Un fav	160	480
Training & seminars	408	653	245	60	Un fav	396	1,200
Wages & on-costs	85,901	98,771	12,870	15	Un fav	89,345	260,762
Utilities	3,441	3,235	(206)	(6)	Fav	3,494	10,589
Total expenses	94,251	106,854	12,603	13.4	Un fav	97,918	286,316
NET PROFIT	31,603	34,282	2,679	8.5	Fav	39,962	101,834

Questions:

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.