Analyzing Budget Deviations in a Hotel

This solved assignment delves into the analysis of budget deviations within a hotel setting. It examines significant variations in expenses across categories such as beer, wine, fruits & vegetables, meat & poultry, and indirect expenses. The assignment outlines steps to mitigate these deviations, including cost reduction strategies, supplier selection methods, and resource allocation improvements. It also emphasizes the importance of communication with suppliers and management for effective budget control.

Manage finance with budget

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
TASK 1............................................................................................................................................1
Q1................................................................................................................................................1
Q2................................................................................................................................................1
Q3................................................................................................................................................1
Q4................................................................................................................................................1
Q5................................................................................................................................................2
TASK 2............................................................................................................................................2
TASK 3............................................................................................................................................3
Q1................................................................................................................................................3
Q2................................................................................................................................................3
Q3................................................................................................................................................3
Q4................................................................................................................................................3
Q5................................................................................................................................................3
PART 2............................................................................................................................................3
TASK 1............................................................................................................................................3
Q1................................................................................................................................................3
Q2................................................................................................................................................4
Q3................................................................................................................................................4
Q4................................................................................................................................................4
Q5................................................................................................................................................4
TASK 2............................................................................................................................................4
Q1................................................................................................................................................4
Q2................................................................................................................................................5
Q3................................................................................................................................................5
Q4................................................................................................................................................5
Q5................................................................................................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
In the management of the finance which will be an important aspect in any business,
there are various tools which can be used and the most common among them is budget. By the
help of this all the requirements will be identified so that plan can be made to meet them in
advance (Gitman, Juchau and Flanagan, 2015). Also the variances will be determined which will
help in knowing the shortcoming and then the measures will be taken to overcome them. In this
report all of these aspects will be discussed by which the finance will be managed in the best
manner.
PART 1
TASK 1
Q1.
Variable direct cost: In this category the expenses will be of Food and beverage purchases.
Variable Indirect cost: Advertising and Accounting are the commitments to be met.
Fixed indirect cost: The expense in this will be of communication and insurance.
Q2.
The top four categories in the business where most of funds are invested are Wages & on
cost, Beverage purchase, food purchase, and utilities.
Q3.
The most funds are spent in these categories as food and beverage will be the basic
requirement of the hotel to be provided and then the staff will be needed to serve the customers
(Culp, 2011). In hotel it is required that all the utilities shall be provided so that visitors will be
satisfied and will visit again.
If proper funds will not be allocated to them then the hotel will not be able to operate in
the proper manner and also the customers will not be satisfied and by this business will have to
suffer loss due to the customer loss.
Q4.
The team will be communicated that the amount of the net profit shall not fall below the
31604 and it can be seen that there are certain expenses such as small equipment replacement
which are fixed and shall not fluctuate. Purchase shall be made according to the targets and there
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shall be no default in relation to it. Also all other expenses will have to be done in the manner by
which they will be incurred to the least level and also the quality and the profitability will be
maintained.
Q5.
To promote the cost control and increase sales, promotion can be made in which the
brand awareness will be created and for this social media can be used and in order to control cost
proper communication of the targets and training shall be provided.
TASK 2
Comparative analysis
April
Favourable /
Unfavourable
Budget Actual Variance Variance
$ $ $ %
Revenue
Food sales 105120 119837 14716.8 14.00% favourable
Beverage sales 89250 96390 7140 8.00% favourable
Total sales 194370 216226 21857 11.25% favourable
Cost of sales
Food purchases 40953 45048 4095 -10.00% unfavourable
Beverage purchases 27563 30043 2481 -9.00% unfavourable
Total cost of sales 68516 75091 6576 -9.60% unfavourable
Gross profit 125855 141135 12.10% favourable
Expenses
Advertising/
Promotions 780 624 156 20.00% favourable
Cleaning contractor 1490 1490 - 0.00% favourable
Small equipment
replacement 333 393 -60 -18.02% unfavourable
Laundry 245 232 13 5.50% favourable
Maintenance 1493 1262 -231 15.50% favourable
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Printing &
stationery 160 195 -35 (22.0%) unfavourable
Training &
seminars 408 653 -245 (60.0%) unfavourable
Wages & on-costs 85901 98771 -12870 -14.98% unfavourable
Utilities 3441 3235 206 6.00% favourable
Total expenses 94251 106855 12604 13.40% favourable
NET PROFIT 31604 34281 2677 8.50% favourable
TASK 3
Q1.
There is the increase in the sales and the variance is positive so there is nothing to be
concerned as the higher sales is good for business.
Q2.
The expense of the small equipment, printing. Training and wages has been incurred in
excess to the targets set and this not good and will be required to be controlled ( Barr and
McClellan, 2010). Purchase has also increased but as it is direct expense so it has increased in
relation to the sales and will not have nay negative impact.
Q3.
According to the analysis it can be said that there are certain deviations from the budget
which shall be taken care off but overall the performance of the company is good as the amount
of the profit has increased to 8.5% which is a good sign.
Q4.
The most of the funds are allocated to the wages and the funds shall be managed in this as
this is using the significant amount of the funds and if not manages then will be adversely
affecting the profits.
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Q5.
From the above analysis it can be seen that most of the targets are met and if not then also
they are in positive terms. Some of the expenses are there which will have to managed in more
effective manner and by this it can be expected that it will be able to meet the future targets also.
PART 2
TASK 1
Q1.
In the May the sales have increased at high rate and by that the purchases has also
increase and the price of the food has increased due to which business will have to bear the
consequences of it. The cost of sales has increase and the amount spend on all the expenses has
increased to great level due to which the amount of the profits made by the company are
suffering (Baker, Singleton and Veit, 2011). Although there is increase in the profit but it could
have been more if the old prices were maintained. In cost of sales and purchases there is negative
deviation and also in all expenses but the profit is experiencing positive deviations.
Q2.
The two reasons of the increase in the food an beverage amount are that the prices of the
vegetables and meat have increased and also the sales has increased due to which more purchase
has been made.
Q3.
The Bistro is not able to meet the targets as the cost of food and beverages is 41 and 33
percent in place of the budgeted 37 and 30%. which shows that the amount spend is more then
the fixed but the overall cost of the sales has met the target as there is the deviation of 4 percent
in favourable aspect.
Q4.
The deviations shall be communicated to the management as on the basis of them only
they will be able to plan for the future and take the step for further improvement.
Q5.
The largest deviations are occurring in beer, wine, fruits and vegetables, and meat and
poultry.
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TASK 2
Q1.
The steps that shall be taken will include that:
 the amount involved in the purchases shall be reduced.
 The suppliers shall be selected who will provide the material at less cost.
 The expenditure in indirect expenses shall be controlled as the are variation at large scale
from the targets.
 Old and experienced employees shall be retained so training will not be required for
them.
Q2.
The supplier information can be collected from the customers to whom they are already
providing and it will be identified that the quality of the products shall be good (Clayton, 2014).
The price which is quoted shall be compared with that charged from others and also reviews of
the other procurers shall be obtained.
Q3.
For this the purchase budget, cash flow statement and the suppliers ledger will be
analysed as by them the required information can be collected.
Q4.
It will be discussed with the current suppliers that whether they are ready to provide the
material at rate provided by others and on the basis of their reply decision will be taken.
Q5.
The consultation will be made with the higher authorities responsible in this regard and
also with the market analyst.
CONCLUSION
From the report it can be concluded that budget are of the great help for any business in
the management of the finance. It has been ascertained that with the help of them hotel has been
able to analyse the amounts which are spend in relation to all the various expenses and the
variances are determined. By that the measures will be taken allocate the resources in proper
manner.
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