TASK 1 - PART A TOP OF THE TOWN HOTEL Budget Variance Analysis Item July August Favoura ble or UnFavo urable Budge Actual Variance t $ $ $ favou 230,000.0 225,00 5,000. rable 0 0.00 00 $ $ $ 230,0 228,0 2,000. favou 00.00 00.00 00 rable $ $ $ 230,00 221,00 9,000.00 0.00 0.00 $ -$ unfav $ 87,000 2,000. ourab 85,000.00 .00 00 le $ -$ unfav $ 15,000 1,000. ourab 14,000.00 .00 00 le $ -$ unfav $ 82,000 5,000. ourab 77,000.00 .00 00 le $ $ favou 35,000 $35,000.00 rable .00 $ 85,00 0.00 $ 15,00 0.00 $ 78,00 0.00 $ 35,00 0.00 $ 85,000 .00 $ 15,000 .00 $ 78,000 .00 $ 35,000 .00 Total Costs $ $ -$ unfav 211,000.0 219,00 8,000. ourab 0 0.00 00 le $ $ -$ unfav 213,0 218,0 5,000. ourab 00.00 00.00 00 le $ $ -$ 213,00 223,00 10,000.0 unfavourable 0.00 0.00 0 Profit or (Loss) unfav 6,000. 13,00 19,000.00 ourab 00 0.00 le 17,00 10,00 7,000. favou 0.00 0.00 00 rable 17,000 (2,000. 19,000.0 unfavourable .00 00) 0 Budget Sales Revenue Food Costs Beverage Costs Labour Costs Fixed Costs Actual Varia nce Favoura ble or UnFavo urable September Budg Actua Varia et l nce $ -$ unfav 86,00 1,000. ourab 0.00 00 le $ 15,00 $ - favou 0.00 rable $ -$ unfav 82,00 4,000. ourab 0.00 00 le $ 35,00 $ - favou 0.00 rable Favourable or UnFavourable favourable $ 85,000. $00 favourable $ -$ 16,000. unfavourable 1,000.00 00 $ -$ 86,000. unfavourable 8,000.00 00 $ -$ 36,000. unfavourable 1,000.00 00 TASK 1 - PART B Answer the following questions. Questions: 1.The Hotel owners and managers would like to know from you the major areas of concern where there is a deviation (from Part A) that needs further monitoring and improvement. 2.Explain the importance to the owners of monitoring budgets and why do you think it will help them to manage their finances better for the business. Monitoring budgets is important that help business to catch any variances in time, to reduce cost and meet the target. If business can realise that there are issues early enough, it will able to adjust the problems and arrange other strategies to compensate. That why budget should be monitored regularly throughout the year. 3.Explain to them the use of analysing the monthly budget and comparing the forecasted budget against the actual budgets. The use of analysing the monthly budget is to compare the actual accounting results on monthly basis to ensure that the business is performing as expected. Every actual revenue and expense item should be compared to the budget figure. It is important to undertake further investigation into budget variances, whether they are over or under. Comparing the forecasted budget against the actual budget should identify areas that are underperformance and make operational changes. Also compare the performance of different sections against budgeted forecast and fix critical areas before seriously affect profitability. 4.Explain your findings and possible reasons for these variances. In July the sales revenue variance was unfavourable -$2,000. In Aug, it was unfavourable variance -$2,000. The food cost variance was unfavourable -$2,000 in July it was also unfavourable in August which was -$1,000. Beverage Costs variance in July was unfavourable -$1,000 but it was improved in Aug, the actual cost was balance the budget, variance was favourable. Labour cost variance in July and August were also unfavourable which was -$5,000 in July and -$4,000 in August. So that total cost variance in July and August were unfavourable -$8,000 in July and -$5,000 in August. Thus, the actual profits in July was lower than budget, the variance was unfavourable, $3,000. In August, the budget was amended lower than July, but so far, the actual profits was still lower than budget, so the total profits variance was unfavourable -$7,000. According the figures, found that although the Food and Beverage Department set out the budget, but it wasn't work and out of the expectation. Can see that the actual profit in July was only $6,000 which was far below than budget of $19,000. Therefore, they amended the profit budget to $17,000 in August, but actual profit was only $10,000. Both months, variance were favourable, out of expectation and the most reason for those variances were increased by high cost. Because the actual cost in July were high than budget, so they arranged more cost in Aug but kept the same budget sale revenue. That only impact the final profit and seem no improvement. The labour costs, food and beverage costs kept on high. They haven't reduced the total cost in August so impacted the profit. And the reason they set higher cost than July maybe they had over prepared the food and beverage in July and employing too many staff than needed to balance the customer level or existing staff doesn't get enough work to do increasing the productivity. 5.Research and suggest what improvements do you think the owners can take to improve this situation. In research from the website http://smallbusiness.chron.com/increase-sales-revenue-5essential-strategies-72413.html, the site provides some strategies to increase sales & revenue. Roughly some points like increase marketing, review pricing strategies and expand distribution channels. After doing the research, there are some suggestions to improve the business. Owner didn't monitored budgets in July and only increased the cost in August. But on the same time, owner didn't increase in sale revenue, even the figure shown that the profit variance reduced in Aug but actually it was not improved. First of all, owner should preparing an operating budget - reset the revenue, expenditure and profit targets in September, referring the figures from July to August. Consider the operational budget and contingency plan. Into practice the budget, owner should inform management to observe and report the guest dining performance. They should calculate how many guest dine in hotel restaurant during each service period also room service. Calculate how much food guest will order and spend per table. Figure it out arrange corresponding staff to on shift and cut the food costs to reduce the food and beverage expenditure and labour costs. To increase the sales revenue, owner can provide some promotion such as provide coupon, buy one get one drink, happy hours offer, seasonal food for guest to attract guest dine in and increase the sales. ASK 2 - PART A The Bentley Hotel FORECAST ROOM REVENUE Annually Room Type King Suite Queen Suite Deluxe Room Standard Room Total Total Rooms Available 20 10 50 40 Projected/Fore Available casted Room Rate days Occupancy 70% $575 365 80% $475 365 89% $375 365 90% $275 365 Projected /Forecasted Revenue per room type $ 2,938,250.00 $ 1,387,000.00 $ 6,090,937.50 $ 3,613,500.00 $ 14,029,687.50 Monthly Room Type King Suite Queen Suite Deluxe Room Standard Room Total Total Rooms Available 20 10 50 40 Projected/Fore casted Room Rate Occupancy 70% $575 80% $475 89% $375 90% $275 Januar y 31 31 31 31 $ 249,550.00 $ 117,800.00 $ 517,312.50 $ 306,900.00 $ 1,191,562.50 Monthly Room Type Total Rooms Available Projected/Fore casted Occupancy Room Rate Februa ry King Suite 20 70% $575 28 $ 225,400.00 Queen Suite 10 80% $475 28 $ 106,400.00 Deluxe Room 50 89% $375 28 $ 467,250.00 Standard Room 40 90% $275 28 $ 277,200.00 Total $ 1,076,250.00 Monthly Room Type Total Rooms Available Projected/Fore casted Occupancy Room Rate March King Suite 20 70% $575 31 $ 249,550.00 Queen Suite 10 80% $475 31 $ 117,800.00 Deluxe Room 50 89% $375 31 $ 517,312.50 Standard Room 40 90% $275 31 $ 306,900.00 Total $ 1,191,562.50 The Bentley Hotel ACTUAL ROOM REVENUE Monthly Room Type Total Rooms Actual Room Available Occupancy Rate January King Suite 20 65% $ 575.00 31 Queen Suite 10 70% $ 475.00 31 Deluxe Room 50 85% $ 375.00 31 Standard Room 40 85% $ 275.00 31 Total 120 Revenue per room type $ 231,725. 00 $ 103,075. 00 $ 494,062. 50 $ 289,850. 00 $ 1,118,71 2.50 Varianc Varianc e e $ % Farourable or UnFavourable -$ 17,825. 00 -7.14% UnFavourable -$ 14,725. 00 -12.50% UnFavourable -$ 23,250. 00 -4.49% UnFavourable -$ 17,050. 00 -5.56% UnFavourable -$ 72,850 -29.69% UnFavourable Monthly Room Type King Suite Total Rooms Actual Room Available Occupancy Rate 20 68% $ 575.00 Februar y $ -$ 218,960. 6,440.0 28 00 0 -2.86% UnFavourable Queen Suite 10 55% $ 475.00 Deluxe Room 50 85% $ 375.00 Standard Room 40 70% $ 275.00 Total $ 73,150.0 28 0 $ 446,250. 28 00 $ 215,600. 28 00 $ 953,960. 00 120 -$ 33,250. 00 -31.25% UnFavourable -$ 21,000. 00 -4.49% UnFavourable -$ 61,600. 00 -22.22% UnFavourable -$ 122,290 -60.82% UnFavourable Monthly Room Type Total Rooms Actual Room Available Occupancy Rate March King Suite 20 67% $ 575.00 31 Queen Suite 10 80% $ 475.00 31 Deluxe Room 50 89% $ 375.00 31 Standard Room 40 90% $ 275.00 31 $ -$ 238,855. 10,695. 00 00 $ 117,800. 00 $$ 517,312. 50 $$ 306,900. 00 $- -4.29% UnFavourable 0.00% Favourable 0.00% Favourable 0.00% Favourable TASK 2 - PART B Answer the following questions. Questions: 1.The Hotel owners and managers would like to know from you the major areas of concern where there is a deviation (from Part A) that needs further monitoring and improvement. 2.Explain the importance to the owners of monitoring budgets and why do you think it will help them to manage their finances better for the business. 3.Explain to them the use of analysing the monthly budget and comparing the forecasted budget against the actual budgets. 4.Explain your findings and possible reasons for these variances. 5.Research and suggest what improvements do you think the owners can take to improve this situation