Managing Financial Resources and Budgeting in Food and Beverage Sector

This article discusses managing financial resources, budgeting, variance analysis, and customer retention rate in the food and beverage sector. It includes examples and calculations for fixed and variable costs, money raised from events, food and beverage cost of sales ratio, labour cost, and customer retention rate. The article also provides references for further reading.

Managing Financial
Resources

TABLE OF CONTENTS
SECTION A.....................................................................................................................................3
Question 2...................................................................................................................................3
SECION B.......................................................................................................................................5
Question 4...................................................................................................................................5
Question 6...................................................................................................................................6
REFERENCES................................................................................................................................9

SECTION A
Question 2
A. Computing fixed and variable component of the event committee
The cost is the most essential aspect to be analysed in better and effective manner. The
reason pertaining to fact is that in case the cost will be more than the sales then company will
suffer loss. Thus, in order to manage the performance and profitability of company it is
necessary to analyse cost in proper and effective manner. In order to calculate the total cost
easily the cost is divided in two different types that is fixed and variables cost.
Fixed cost- the fixed cost is being referred to cost which remains same at any level of
production. Even in case there is no production then also fixed cost will be charged. The fixed
cost can also be named as overhead cost or period cost (Oktavia, Aman and Hanum, 2019). The
fixed cost may include the expenses like rent, insurance, telephone expenses, interest expense,
depreciation. For example, a company has taken a factory on rent and in case there is no
production in one month then also they have to pay the rent. Thus, this simply implies that there
is no effect on the fixed cost whether the production level increase or decrease or even there is
situation of no production.
Variable cost- this is stated as the cost which varies with the level of production or the
volume of production. In simple terms, when the production is zero then there is not variables
cost and as the production increases the variable cost also increases in the same proportion. This
cost may also be stated as prime cost or the direct cost (Fülöp, Bakó and Stanciu, 2021). The
example of variable cost involves raw material, labour, wages, commission on sales and many
other expenses. The variable cost is being calculated by multiplying the variable cost per unit
with the total number of output produced.
With respect to Cleveland Recreation Centre has also incorporated different expenses in
order to organize the event of annual fundraising. For the event organizing there are many
different expenses to be incurred by the company and it can be classified as fixed and variable.
Thus, the fixed and variable component of Cleveland Recreation Centre for organising annual
fundraiser is as follows-
Fixed cost Amount (in £)
Ballroom rental 2900

Entertainment 4500
Printing 600
Decoration and favors 700
Total fixed cost 8700
Variable cost per unit amount (in £)
Printing 9
Food 29
Decoration and favors 5
Total variable cost per unit 43
Thus, with the above calculation it is clear that in order to organize the event of
fundraising, the total fixed cost incurred will be £8700 and the variable cost per unit will be £43.
B. Calculating money raised in case company charges £100 per person
Just calculating the total cost is not enough rather it is necessary for Cleveland Recreation
Centre to calculate that how much money they have raised with the event. Thus, in order to
calculate the money raised with the event the total expenses will be deducted from the total
income. With the help of this calculation the company will come to know that how much money
they have raised with help of the event. In the present case, Cleveland Recreation Centre expects
that there will be 3000 people attending the event. So the calculation will be based by
considering the total people of 3000.
Particular Amount (in £)
Sales (A) 300000
Number of people 3000
Charges per person 100
Less: variable cost (B) 129000
Number of people 3000
Variable cost per unit 43
Contribution (A- B) 171000
Less: Fixed cost 8700
Profit (contribution - fixed cost) 162300

With the help of above calculation, it is clear that the total money raised with the help of
the event is £162300. The total sales of the event are 300000 as there are total 3000 people
expected to come and each person is charged with 100. The above calculation clearly states that
the contribution is 171000 which is being calculated by deducting variable cost from sales.
Further for reaching to the final money raised the fixed cost is also reduced from the contribution
and this totals to 163200 and this is the final money which has been raised by the event of
fundraising.
SECION B
Question 4
Budgeting and forecasting
The budgeting is being defined as the process of quantifying the expected revenue and
expenses of the business which they want to attain within the future. On the other hand, the
financial forecasting refers to as estimating the total amount of revenue or any quantifiable unit
which needs to be attained in future. For the business to be successful it is necessary to have an
effective budget and forecasting in order to predict the future working (Jin and et.al., 2020). This
budget provides guidance to the company that have they have to manage their business in order
to attend the forecasted production. The example of budget involves that the marketing expenses
must be till 10,000. On the other hand, the example of forecasting involves that term the payroll
will be 10000 per month.
Variance analysis
The variance analysis may be stated as the difference between the planned and the actual
working. In order to get successful, the company said some standard and then compare the actual
performance with the standard. This is necessary in order to evaluate that whether the planned
performance has been attained or not (Langan and et.al., 2019). For example, the company has
predicted that they will sell 10,000 units in the next month. But in actual the company sold only
9500 units. Then the variance is 500 units that is the company was not able to achieve the target
of 10000 units by 500.
Adverse variance
The adverse variance is the type of variance where in the actual income is less than the
planned income or the actual expenditure is more than the planned expenditure. Generally, the

adverse variance is the deficit where in the plant performance has not been attained by the actual
performance. For example, the planned cash receipts over 40,000 but in actual the receipts were
only 30,000. This implies that there is an adverse variance of 10,000 that is the difference within
the actual and the plant.
Favourable variance
The favourable variance may be referred to as the condition where in the actual income is
more than the budgeted income. With respect to expenditure it means the actual expenditure is
less than the budget expenditure. What the business to be successful it is necessary that they
must have always the favourable very answer within the plant and the actual performance
(Hafemeister and Satija, 2019). For example, the company expected that they will have to pay
10000 for the maintenance of equipment. Button actual the company had to only pay 7,500 this
implies that there is a favourable variance of 2500. Thus it clearly implies that the expenditure is
less as compared to the plan and hence there is a favourable variance.
Direct labour variance
The direct labour cost variance is defined as the deviation within the standard cost for the
actual production and the actual cost within the production (Herawati and Putra, 2018). In simple
words it can also be referred to as the difference within the actual cost for direct labour and the
budgeted cost based on the Standard production.
Total direct labour variance = (SR x SH) – (AR x AH)
For instance, a company is having the standard rate of 12 per hour and standard hours at 4
hours per case. The standard working hours before 2000 but in actual the employees work 36
hours and were paid with the average rate of 13 per hour. Then the direct labour variance will be
as follows-
Total direct labour variance = (SR x SH) – (AR x AH)
= ($12.00 x 4,000) – ($13.00 x 3,600)
= $48,000 – $46,800 = $1,200 favourable
Question 6
Food cost of sales ratio
The food cost includes a very large amount of money which is used an order to run a
restaurant. And this is the most important metrics which need to be analysed by the restaurant

and order to attain the success of the business. In case the restaurant will not know about the
food cost percentage then the restaurant made Face loss.
Total Food Cost Percentage = (Total Cost of Goods Sold / Total Revenue) x 100
For example, a dish cost $3 to make and sell for $6. Then total food cost percentage will be
= (3/ 6) * 100
= 50%
Beverage cost of sales
The beverage cost is being defined as the percentage of total revenue which is being
earned by the restaurant because of the beverage section. The beverage is also a large segment
within the total revenues of a restaurant (Janice and Toni, 2020). Hence it is very essential for the
restaurant that they must analyse the total cost of sales so that they can identify the revenue being
earned from the section of beverages is well.
Beverage Cost = Cost of alcohol sales / Total alcohol sales
For example, a restaurant has total alcohol sales of 45000 whereas the cost of the alcohol sale
was 30000. Than the beverage cost of sale is
= 30000/ 45000
= 0.67
Revenue per available seat hour
The revenue per available seat hour is a revenue management tool being used by the food
and beverages companies within the hotel (Martinelli and et.al., 2020). This analysis is useful in
measuring the usage and the revenue with on by the seat for our and it also assist company in
understanding and planning the Strategies for food and beverage.
RevPASH = Sales per Hour / Number of Seats by the Hours
The total of 300 rooms are available and occupancy rate is 70 %. This implies that there is 210
room occupied. Thus, multiplying the room available by 100 and dividing the total by 300 the
RevPASH is 70.
Labour cost
The labour cost is defined as the total cost which comprises of all the expenses being bad
by the employer for the employing of the staff. This labour cost includes the different
compensation being paid to the Employees along with the wages and salaries the social
contributions cost of professional education training and development and other expenses

relating to recruitment of the new employees. For every restaurant organisation it is necessary
that they inculcate the labour cost (Angelia and Toni, 2020). For calculating the labour cost is the
direct labour hour rate is being multiplied by the number of direct labour hours worked. For
example, the direct labour rate is 10 and it takes 5 hours to complete one unit then in order to
calculate the direct labour cost we multiply 10 by the five that is 50 is the labour cost.
Customer retention rate
The customer retention rate is being defined as to percentage of accepting customers who
remain the consumers even after a given period of time (Hashim and Shahrumzaki, 2020). For
the organisation to be successful it is necessary that the customer retention rate must be high
because this implies that the same number of consumers are being retained within the
organisation for a longer period of time.
CRR = [(E-N)/S] x 100
Where
E refers to the number of customers at the end of the time period
N includes the number of new customers gain within the time period
S is the number of customers at the beginning of time period
For instance, company is having 100 consumers at the starting of the period and by the end of the
period 120 consumers are there. On the other hand, is 40 customers are added over the period.
Them the customer retention rate is in
[(E- N)/ S] x 100
[(120- 40)/ 100] * 100
= (80/ 100) *100
= 80%

REFERENCES
Books and Journals
Angelia, N. and Toni, N., 2020. The Analysis of Factors Affecting Dividend Policy in Food and
Beverage Sector Manufacturing Companies Listed in Indonesia Stock Exchange in
2015-2017. Budapest International Research and Critics Institute-Journal (BIRCI-
Journal), pp.902-910.
Fülöp, Á.Z., Bakó, K.E. and Stanciu, A., 2021. SEPARATION OF FIXED AND VARIABLE
COSTS FROM MIXED COSTS AT A WATER AND SEWERAGE
OPERATOR. Annals of the University of Oradea, Economic Science Series, 30(1).
Hafemeister, C. and Satija, R., 2019. Normalization and variance stabilization of single-cell
RNA-seq data using regularized negative binomial regression. Genome biology, 20(1),
pp.1-15.
Hashim, S.L.B.M. and Shahrumzaki, N.I.I.B., 2020. The Impact of Profitability, Leverage and
Dividend on the Share Price of Food and Beverage Sector in Malaysia. Global Business
& Management Research, 12(4).
Herawati, A. and Putra, A.S., 2018. The influence of fundamental analysis on stock prices: The
case of food and beverage industries. European Research Studies Journal, 21(3), pp.316-
326.
Janice, J. and Toni, N., 2020. The Effect of Net Profit Margin, Debt to Equity Ratio, and Return
on Equity against Company Value in Food and Beverage Manufacturing Sub-sector
Companies listed on the Indonesia Stock Exchange. Budapest International Research
and Critics Institute (BIRCI-Journal): Humanities and Social Sciences, 3(1), pp.494-
510.
Jin, Y., and et.al., 2020. Diagnostic value and dynamic variance of serum antibody in
coronavirus disease 2019. International Journal of Infectious Diseases, 94, pp.49-52.
Langan, D., and et.al., 2019. A comparison of heterogeneity variance estimators in simulated
random‐effects meta‐analyses. Research synthesis methods, 10(1), pp.83-98.
Martinelli, L.A., and et.al., 2020. Carbon and nitrogen isotope ratios of food and beverage in
Brazil. Molecules, 25(6), p.1457.
Oktavia, M., Aman, A. and Hanum, F., 2019, July. Utilization of groundwater for the bottled
water industry by minimizing fixed and variable cost. In IOP Conference Series: Earth
and Environmental Science (Vol. 299, No. 1, p. 012036). IOP Publishing.