Finance Report: Budget Analysis and Variance for Jackson Hotel

This report provides a comprehensive analysis of the Jackson Hotel's financial performance, focusing on budget management and variance analysis across multiple case studies. It examines variable and fixed costs, revenue streams, and expense categories. The report includes detailed calculations of variances between budgeted and actual figures for revenue, cost of sales, and expenses, highlighting areas of favorable and unfavorable performance. It also delves into strategies for cost control, inventory management, and supplier relationships, offering insights into operational improvements. The report presents findings on sales targets, cost deviations, and the overall financial health of the hotel, offering recommendations for future budgeting and financial planning.

Manage finance within a budget

Table of Contents
Case study A...............................................................................................................................1
Task 1 Monitor Budget...............................................................................................................1
Task 2 Calculation of variance....................................................................................................4
Task 3 .........................................................................................................................................5
Case study B....................................................................................................................................6
Task 1..........................................................................................................................................6
Task 2..........................................................................................................................................7
Task 3..........................................................................................................................................8
Case study C..................................................................................................................................10
Task 1........................................................................................................................................10
Task 2........................................................................................................................................10
Task 3........................................................................................................................................12
Task 4........................................................................................................................................12

Case study A
Task 1 Monitor Budget
Question 1.
Variable direct cost
Some of the common variable direct cost for the Jackson hotel are as follows:
 Laundry Maintenance.
Variable indirect cost
The major variable indirect cost to the hotel during the specific period are:
 Wages Utilities
Fixed indirect cost
These are cost which are fixed for the period but do not have the impact over business
operation in direct way. Some the common fixed indirect cost are:
 Rents
 Salaries
Question 2
The main four categories which have been listed by the Jackson as per the allocation of
higher fund in the respective budgeted period these are named underneath:
 Wages and on cost
 Beverages purchase
 Food purchase
 Utilities
Question 3
It is very clear that company must have a proper plan to allocate the fund in significant
manner as without allocation limits overall expenditure can be greater than actual revenue which
further can result into financial problems like shortage of funds. Thus, Jackson hotel manager
prepare monthly budget in order to reduce the chances of financial pitfalls and as a results other
operation of hotel can also get impacted.
Question 4
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In hospitality industry, there is a specific need of communication of all plans and policies
made by the higher management which enables all worker in different department to understand
the need of company and perform work in most professional manner. This all help in reaching
the desired goals and maintain a good image of respective hotel in the competitive market. In the
context of Bistro department of Jackson Hotel the most important information which is needed to
be delivered to the entire team which make sure that they recognise the main target and objective
to be attained in respective period are as follows:
 State of purpose:
 Costing trends:
 Market trends:
 Outcome and results:
Question 5
There are number of common techniques which are used to promote awareness in
regards to methods of controlling cost or even increasing sales for the respective company to
reach the desired outcome. Some are elaborated underneath:
Conduct Inventory Consistently: Inventory of food, beverages and serving supplies
should be conducted at least once per week.
Pros:
 It will show how food being used, lost or stolen.
 Usage rate will help in deciding menu item costs. Helps in controlling and maintaining costs.
Cons: Staff might think that they are not trusted by management.
 Impact on customer service: Customer will be happy to receive food at convenient price as compare to market.
Changing supplier: It always cheaper when orders in bulk but as of food industry,
purchase in huge quantity may not be possible. Hence join a purchase group can help Jackson to
enjoy lower food prices.
Pros:
 Purchasing in huge quantity provides price advantage to respective hotel. Customer will enjoy cheap product nourishing with good quality products.
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Cons: It is not possible that all purchase group chain orders particular item at single point.
Do more prep work: Prepared food is more expensive than raw ingredients. For instance;
instead of purchasing chopped lettuce, kitchen department can buy heads of lettuce and cut by
chef itself.
Pros:
 Buying raw food will help in maintaining overall cost of item. It will have both negative as well as positive impact on customer service.
Cons:
 Preparing food at own place will increase the time of processing and requires more staff.
For instance; if Jackson manager assist with extra staff for processing semi finished
product than it will give reach taste to customer and thus having positive impact.
Review produce specifications: Jackson manager must know what it want to serve to its
customers and what quality it requires sometimes providing high quality ingredients and lesser
quality product creates less difference in taste but affect cost by much impact.
Pros:
 It will help in reducing cost and maintenance of food price. It can impact negatively to company’s image if difference is much in taste of food.
Cons: Less quality ingredients can be tracked from regular customers using particular dish for
long time and it might be possible that he no longer use this service.
Manage taste: Keep record of all the waste your restaurant generates.
Use a waste chart and write down any of the following:
 Food returned because it was made incorrectly.
 Food that was spilled in the kitchen or on the floor.
 Food that was burned in the kitchen.
 Extra portion sizes that get thrown away.
By keeping track of this, you can keep better track of your inventory and manage your
food cost percentage. Additionally, then you can do what you can to reduce the instances of
waste.
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Food portion appropriately: Food waste can eat up Jackson bottom line quickly. Thus
the manager must have the goal to make team member and cooking staff to serve just the right
amount of food and avoid the situation over or under fill plates.
 This can be properly done by the staff member in a manner that they must watch the
plates as they come back to the kitchen.
 Always work to make hotel menu better and refine overall ingredients’ list so that waiter
aren’t overfilling plates and losing money.
Task 2 Calculation of variance
April
Favourable/
Unfavourable
Budget Actual
Varian
ce
Variance
(%)
$ $ $ $
Revenue
Food sales 105120 119837 14717 14.00 Favourable
Beverage sales 89250 96390 7140 8.00 Favourable
Total sales 194370 216226 21856 11.24 Favourable
Cost of sales 0
Food purchases 40953 45048 4095 10.00 Unfavourable
Beverage purchases 27563 30043 2480 9.00 Unfavourable
Total cost of sales 68516 75091 6575 9.60 Unfavourable
Gross profit 125855 141135 15280 12.14 Favourable
Expenses 0
Advertising 780 624 -156 -20.00 Favourable
Cleaning contractor 1490 1490 0 0.00
Small equipment
repair 333 393 60 18.02 Unfavourable
Laundry 245 232 -13 -5.31 Favourable
Maintenance 1493 1262 -231 -15.47 Favourable
Printing and
stationary 160 195 35 21.88 Unfavourable
Training and
seminars 408 653 245 60.05 Unfavourable
Wages and on costs 85901 98771 12870 14.98 Unfavourable
Utilities 3441 3235 -206 -5.99 Favourable
Total expenses 94251 106855 12604 13.37 Unfavourable
Net profit 31604 34281 2677 8.47 Favourable
Task 3
Question 1
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From the above calculation of variance it has been determined that the total sales for the
period of April is favourable because the budgeted sales was $ 194370 and actual sale was $
216226. As Food sales budgeted amount was $ 105120 and actual food sales was $ 119837, thus
variance was $ 14717 for the month April that define the difference was favourable by 14%. On
the other side, sales from beverages budgeted to amount $ 89250 and actual figures from selling
beverages in month April was $ 96390 thus the variance was favourable by 11.24 %.
Question 2
From the above table, it has been determined that there have been various variance in the
expenses category which are unfavourable for the company during the month of April such as
Wages and on costs, Training and seminars, Printing and stationary, Small equipment repair etc.
As a results there is no need of any furthermore investigate about these unfavourable variations
in figures because at the end company is earning a decent net profit which help in recovering all
extra funds.
Question 3
The above calculated variance table is helpful in determining that Yes Bistro is very well
operating throughout the April to meet its budgets targets. As a result there is a net income of $
34281.
Question 4
From the table above, it is identified that Wages and on cost have the highest budgeted
funds allocated because these expenses are related with cost paid by company to their labour.
These cost are strictly related to the operation of Bistro thus can not be reduce or cut down
because any cutting of cost related with wages can reduce the productivity of Bistro.
Question 5
 Yes the overall Budget of April is beneficial in defining the status that budget of month
June will be attained by Bistro as results are favourable in the current period.
 The table of variance shows that Printing and stationary, Wages and on costs and Small
equipment repair were the areas of under performing. Similarly, Utilities, Maintenance
and Laundry are the areas of over performing.
 Outline of budget for May month:
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 Some main organization factors have contributed in setting the budgeted target for the
next month is to increase the net profit, reduce the operating cost and most important is
to attain the superior position in competitive market.
Case study B
Task 1
Question 1. How outcome foods and beverage sales and cost indicated in May comparative
report impact the Bistro area and business.
On the basis of comparative analysis of month of May, this can be find out that food sales
were estimated to occur of $114975 but in actual sales was of $112676. Same as the beverage
sales was also lower than estimation. Due of this total sales also affected negatively such as total
sales was of $203173 but estimation was of $206850. This will impact to company’s net profit
negatively. It is so because net profit depends on total sales.
Question 2. Possible explanation for deviation in food and beverage costs.
On the basis of purchasing budget for month of May, this can be find out that total cost of
food purchase was of $45864 which was expected of $42194. This is the main cause which
resulted as deviation of food cost. As well as beverage purchasing cost was also higher than
standard cost. The difference is of $2625 that resulted as higher cost in actual.
Question 3. Is Bistro meeting organisational goal of sales.
On the basis of given information of budget, this can be find out that company’s food
cost is of $45864 and food sales is of $203173. Thus,
Food cost as % of sales= 45864/112676*100
= 40.70%
Beverage cost as % of sales= 29399/90247*100
= 32.57%
Items Budgeted Actual
Food cost as % of sales 37% 40.70%
Beverage cost as % of sales 30% 32.57%
This is showing that company is not meeting the budgeted target of sales.
Question 4. Should these deviations to be reported to management.
Yes, these deviations should be reported to management. This is so because on the basis
of this variation, the management will take suitable steps in preparation of next year’s budget.
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On the basis above data, this can be find out that actual food cost was estimated of 37% but in
actual it was of 40.70%. Same as in the other cost, the value was more than expectation. Thus
company should report this to managers.
Question 5. In what categories food and beverage cost deviation is occurring.
There are some activities on which cost is higher than budgeted and some of them are
mentioned below:
Food cost:
Budgeted Actual Variance
Fruit and vegetables 5063 5970 906
Meat 14768 17662 2895
Fish 4219 4506 287
Beverage cost:
Budgeted Actual Variance
Beer, ciders 5891 6762 872
Beer-Keg 4552 5162 610
Wine 4820 5359 540
Task 2
Question 1
 Food portion appropriately
 Manage taste
 Review produce specifications
 Do more prep work
 Changing supplier
 Conduct Inventory Consistently
Question 2
Sources of supply vary considerably from location to location. Large cities have a greater
number and variety of suppliers than do small towns and isolated communities. There are two
major food categories: perishables and non-perishables. Items which include fruits, vegetables,
fresh fish and shellfish, fresh meats, poultry and dairy products are basically Perishable items.
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Dry goods, flour, cereals, and miscellaneous items such as olives, pickles and other condiments
are basically Non-perishable items.
Question 3
The financial document which give the brief idea about the increase prices of supplier can
be:
 Bistro Purchasing budget for particular month.
 Invoice copy
 Income statement for the specific month.
Question 4
As current supplier are selling food at higher cost and in case if manager determine other
reasonable supplier of same product in market then they make suitable decision for the
betterment of Bistro. Such as they should clearly pitch their old supplier to reduce the price,
supply regularly whenever there is a need of specific item otherwise they will move to new
supplier.
Question 5
In context of making any changes to the hotel supplier of fruit, vegetables and other
seafood, manager must concern the entire scenario with the Board of director of Hotel as well as
specific manager of supply chain manager in order to make profitable decision.
Task 3
Question 1. Variance % table.
Bistro labor budget- variance percentage
Category April May June June quarter
Salaries 0 0 0 0
Front of
house -15.8 -16.3 -14.4 -15.5
Kitchen -20 -20.9 -20.5 -20.5
Total labor -15 -15.6 -14.3 -15
Question 2. Mean of variance and its impact.
On the basis of June quarter performance, this can be find out that company is unable to
reduce their expenses in actual. As their all expenses are more than budgeted cost.
Variance- It can be defined as variation between actual and estimated value cost and
income. It is presented in two ways including favourable and unfavourable. This can impact to
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companies’ goals. It is so because if expenses are in unfavourable condition than company will
not be able to generate higher profits.
Question 3. Impact of over staff on customer service level.
Due to more number of staff members, the level of customer service will surely increase
because there will be enough range of employees to serve customers in an effective manner.
Impact on team- There will be a positive impact on team members because if there will be more
staff than team will be able to manage more number of customers. But there will be a negative
impact also which is labour inefficiency.
Impact on budgeted target- Due to this budgeted target will also affected negatively because cost
will be higher.
Question 4
The main payroll documentation that can be used to maintain detail record as well as
manage funds related with labour cost during the budget period is:
 Salary slips
 Staffing level card
Question 5
At the time of making changes in the labour roster as well as modification in the desired
outcome there must be proper discussion with team leader managing staff, upper level manager
who actually delegate work and more importantly with cost accountant of hotel in order to revise
the entire payment structure for labour.
Question 6
This have been recommended that there must be not much changes to staffing levels
because changes will have a negative impact on customer service standards and food quality,
which will leading to an increase in customer complaints and as a result could lead to lower
customer numbers and sales revenue over the next year. Hence, it is strongly recommended only
smaller cuts to front of house team during busiest periods. It is also suggested to transfer more
work on casual staff during pick hours and customer feedback should be given more priority for
streamline work practices.
Case study C
Task 1.
Monthly actual June quarter actual results
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result
May June July Budget Actual
Varianc
e Variance %
$ $ $
Revenue
Food sales 119837 112676 110356 328500
34286
9 14369 4.37
Beverage sales 96390 90497 84630 262500
27151
7 9017 3.44
Total sales 216227 203172 194986 591000
61438
5 23385 3.96
Cost of sales 0
Food purchases 45048 45865 42174 124100
13308
7 8987 7.24
Beverage purchases 30043 29399 23827 78750 83269 4519 5.74
Total cost of sales 75091 75264 66001 202850
21635
6 13506 6.66
Gross profit 141135 127909 128986 388150
39802
9 9879 2.55
Expenses 0
Advertising 624 981 884 2600 2489 -111 -4.27
Cleaning contractor 1490 1490 1490 4471 4471 0 0.00
Small equipment
repair 393 288 372 1000 1053 53 5.30
Laundry 232 237 283 735 751 16 2.18
Maintenance 1262 1329 1314 4480 3905 -575 -12.83
Printing and stationary 195 114 145 480 454 -26 -5.42
Training and seminars 653 713 519 1200 1884 684 57.00
Wages and on costs 98771 103263 97745 260762
29979
9 39037 14.97
Utilities 3235 3456 4190
10588.
5 10881 292.5 2.76
Total expenses 106855 111890 106942 285857
32568
7 39830 13.93
Net profit 34281 16018 22044 102293 72343 -29950 -29.28
Task 2.
Monthly
actual
results
Comparison to
previous June
quarters
M
a
y
Ju
ne
Ju
ly
June
quarter -
current
June
quarter -
200X
June quarter -
20XX
Variance
200x to
current
Variance 20XX to
200X
V
%
V
%
V
% $ $ $
Differ
ence %
Differ
ence %
Revenue
Food sales
1
4 -2
1.
8 328500 286781
2569
55 41719
12.
7
29826
.0 10.40
Beverage 8 - 4 262500 228638 2089 33862 12. 19663 8.60
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sales
1.
5 75 9 .0
Total sales
1
1.
2
-
1.
8
2.
7 591000 515418
4659
30 75582
12.
8
49488
.0 9.60
Cost of
sales 0
Food
purchases
-
1
0
-
8.
7
-
6.
2 122859 106273
9660
2 16586
13.
5
9671.
0 9.10
Beverage
purchases -9
-
9.
8
2.
4 78750 66229
6073
2 12521
15.
9
5497.
0 8.30
Total cost
of sales
-
9.
6
-
9.
1
-
2.
9 201609 172502
1573
34 29107
14.
4
15168
.0 8.79
Gross profit
1
2.
1
-
7.
2
-
2.
7 389391 342916
3085
96 46475
11.
9
34320
.0 10.01
Expenses 0
Advertising
2
0 -2 -3 2600 2275 2025 325
12.
5 250.0 10.99
Cleaning
contractor 0 0 0 4471 3845 3230 626
14.
0 615.0 15.99
Small
equipment
repair
-
1
8
1
3.
7
-
1
1.
6 1000 890 829 110
11.
0 61.0 6.85
Laundry
5.
5
3.
2
-
1
5.
4 735 642 581 93
12.
7 61.0 9.50
Maintenanc
e
1
5.
5
1
1
1
2 4480 3754 3274 726
16.
2 480.0 12.79
Printing and
stationary
-
2
2
2
9
9.
2 480 453 425 27 5.6 28.0 6.18
Training
and
seminars
-
6
0
-
8
0
-
3
1 1200 1062 1017 138
11.
5 45.0 4.24
Wages and
on costs
-
1
5
-
1
5.
6
-
1
4.
3 260762 219822
2006
98 40940
15.
7
19124
.0 8.70
Utilities 6
1.
1
1
4.
7 10589 8661 7674 1928
18.
2 987.0 11.40
Total
expenses
1
3.
4
1
4.
4
-
1
3.
8 286316 241405
2197
52 44911
15.
7
21653
.0 8.97
Net profit 8.
5
-
6
-
3
103075 101511 8884
4
1564 1.5 12667
.0
12.48
11

0.
1
0.
4
Task 3.
Preparation of report on the basis of trend analysis, profit and loss account.
 June quarter shows negative variance between budgeted and actual performance;
Revenue of the company deceases by 4% and £23,385; but instead of decreasing, cost of
sales increases by 7% which creates variation of about £13,506. This is the main reason
behind COOKERY’s decline in gross profit; as it decreases by 3% amounted to 9879
pounds.
 On the basis of profit and loss statement of company, this can be find out that value of
profit is higher in month of May that is of $34281 and lower profit is in month June of
$16018. This is so because of more number of expenses in month of June. In addition, in
the context of variances, this can be stated that there are some negative variances such as
on advertising, maintenance and printing etc. While rest of the items are producing
positive results.
 Trend analysis- On the basis of information of trend analysis, this can be find out that
there is both negative and positive variances. In the aspect of June month, this can be find
out that there is more number of negative variances and in the May month there is less
number of negative variances. Trends of May, June and July shows continuous decrease
in sales of both food and beverages. But still cost of sales shows increases trend from
May to June; in July COOKERY able to control its cost of sales and showing downward
trend. All other variable expenses except cleaning contractor shows same trend; cleaning
contractor is agreement of service at fixed rate hence do not show any deviations.
 Comparative analysis report of May, June and July indicates that the main reason behind
this variation is difference between actual and estimated values. Such as the advertising
expenses were estimated to occur of $2600 but in actual it occurs of $2489 in month of
June. So difference is considered as variance and this is the reason for which variance has
been occurred in most of the items.
 On the basis of trend analysis outcome, COOKERY has taken initiative step to control
further deviations in the month of August; first of all it has find key areas where cost of
sales could be minimized. It has adopted cost volume analyses technique to get point to
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be improved. Additional to this company has decided to cut the salary of marketing and
advertising department due to their bad efforts and to reduce next month’s cost. It has
identified alternate suppliers which can provide foods and beverages at cheap rate and
also facilitating credit options to company. This will control Cost of sales of Cookery.
Task 4.
Question 1. Factors for consideration in preparation of financial reports.
In the preparation of financial statements different types of factors are considered and
some of them are mentioned below in such manner:
 Sales performance- This factor has been used in order to prepare income statement and
budget.
 Variances in income and expenses- It is also used for trend analysis so that actual amount
of difference can be find out.
 Expenditure- This is also used for preparation of income statement and it is being
presented to show total of cost that occurred.
 Daily, weekly and monthly transactions: These transactions influence preparation of
report through effecting working capital changes. Any increase and decrease in single
day transactions can affect monthly as well as yearly performance of Cookery.
 Performance of department: While making budget; every department allocated with
certain amount of expenses; if they unable to operate efficiently, it can increase negative
variations on overall profit.
 Sales returns: Also known as return inwards basically increases purchases and decreases
revenue; hence more returns will affect overall sales of the Cookery and impact
negatively variation.
 Staff Costs: This factor is associated with salaries and commissions; thus increase in
these costs will increase negative deviation and decrease will favour company’s
performance.
 Cash flow: It shows liquidity of company; more cash is favourable for business and
shows positive sign while negative cash flows increases the variation of Current Assets in
balance sheet.
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 Occupancy rate and financial return: More occupancy and financial return shows
favourable changes and thus results in positive variance in report and less occupancy rate
shows negative impact on net revenue of Cookery.
 Stock levels, Wastage and Yield: Any increase in these factors affect company by
increases overall cost of sales and increase variations in negative directions; while
reducing wastage of raw materials, maintaining proper stock level and yield support
Cookery in earn more profit even at low revenue.
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