SITXFIN003 Manage Finances Within a Budget - Case Study

SITXFIN003 MANAGE FINANCES WITHIN A BUDGET – Case study
ASSESSMENT D – CASE STUDY (PART 2)
INSTRUCTIONS (for assessments not embedded within the LMS)
 The assessment must be written using an industry standard software package such as Microsoft
Word, Excel, PowerPoint, etc.
 Name the file using the assessment task number and then save your file.
 Ensure your submission identifies the unit code and title, the assessment task number and the name
of the assessment at the top of the page. Alternatively, you may place this information in the
document header.
 Add your name and student number to the header or footer on every page.
 On completion, submit your assessment to your assessor via the LMS.
This unit applies to tourism, travel, hospitality and event businesses. While the case study
scenario is based on a hospitality business, the principles for managing a budget demonstrated
in this assessment are the same in all types of businesses.
Learner assessment guide and evidence
This assessment requires you to calculate and report on budget deviations.
You are required to do the following.
 Complete Tasks 1, 2 and 3 in Assessment D.
 Read the scenario and answer the questions.
 Any budget calculations can be completed manually, using account software or computer-
based spreadsheet software, such as Microsoft Excel or Google Sheets.
Case study
JJ’s Bistro is located in Jackson’s hotel. 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 play areas are within view of customers seated in the rear section of the bistro.
The following events took place during the May 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 glut in the market.
 Beer prices have risen slightly, again due to the drought leading to shortages of ingredients
and an increase in government taxes.
 Most utility companies increased prices by 7% at the start of May.
 The local police started a blitz on drink driving in the middle of May with increased police
presence in local suburbs and roadside testing of drivers.
 In-house training was provided to key food and beverage staff in April by a coffee supplier.
The aim is to increase sales and the quality of coffee served. The training was free of charge
as part of a new preferred supplier contract with the coffee supplier.
 A major wine supplier has been running an in-house promotional campaign, with staff
training provided to help increase product knowledge.
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SITXFIN003 MANAGE FINANCES WITHIN A BUDGET – Case study
 The bistro menu changed to the new winter menu on 1 May 20XX. It was heavily promoted in
May throughout the hotel and in local community newspapers.
Task 1: Interpret budget results
 Go to your Course files folder and open Assessment D_Bistro May budgets.
 Evaluate the budget outcomes and their impact on the operation and financial goals of the
bistro.
 Answer all questions based on the outcomes in the comparative analysis report, Bistro
purchasing budget – May and the case study information.
Q1: Discuss how the outcomes food and beverage sales and costs of sales indicated in the
May comparative analysis report impact the bistro area and the business overall. Consider
the types of deviation (positive or negative) and size of the deviations in food, beverage
and total sales and cost of sales categories.
The hotel has the variance % of 2 and 1.5 in food and beverage sales respectively. This is
not good for the hotel since such variances are the cause that the hotel ends up in
incurring more costs and hence, the reduced profit. The variance is negative for both.
This affects the sales of the food and the beverages sine if the prices are more, then the
customers may not be inclined in purchasing them and this would in turn affect the sales
of the hotel as well.
Q2: What are two possible explanations for the deviations in food costs and beverage costs?
Consider information provided in the May purchasing budget as well as the comparative
report and case study information.
The following could be the causes:
 The price per unit could have gone up due to change in the market conditions.
This could be seen from the hotel of 2 and 1.5 in the sales of food and beverages.
 The company could have been purchasing the individual quantities of the food
since if the hotel would have been purchasing in bulk, it would have been charged
less per unit.
Q3: When preparing the budgets, the hotel forecasted food costs as 37% of food sales and
beverage costs as 30% of beverage sales.
Is the bistro meeting organisational goals for cost of sales? What is the difference
between the budget target and actual results?
 Food purchases
In respect of food purchases, the hotel has the variance of $16,675 which is not good.
Hence, the hotel is not meeting the organisational goals.
 Beverage purchases
In respect of beverage purchases, the hotel has the variance of $6,084 which is good.
Hence, the hotel is meeting the organisational goals.
In nutshell, Bistro is not meeting the organisational goals.
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SITXFIN003 MANAGE FINANCES WITHIN A BUDGET – Case study
Q4: Should these deviations be reported to management? Explain why/why not.
Yes, the deviations in respect of the food purchases must be reported to the management due
to the issue that these have the variation of about 8.7% and also since this form the part of the
direct costs for the hotel.
But the variation for the beverage purchases may not be reported to the management since this
is a favourable variance.
The food costs $45,865 which accounts to 60.93% of the total cost of sales whereas the
beverages cost about $29,399 which contributes to about 22.98% of the total cost of sales.
These are major variances and hence, the same must be reported to the management so that it
can look into ways to reduce these.
Q5: Based on the May purchasing budget, in what categories are the largest food and
beverage cost deviations occurring?
The major variances occur in the following categories:
 Beverage purchases
 Food purchases
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