Budgeting in Hospitality: SITXFIN004 - Prepare and Manage Budgets

This assignment solution addresses the preparation and management of budgets within a hospitality context, specifically focusing on the SITXFIN004 unit. It includes anticipated revenue forecasting for food and beverage, overhead cost analysis, and profit projections. The solution also delves into variance analysis, comparing budgeted figures with actual results to identify discrepancies in customer numbers, revenue, cost of goods sold (COGS), staff costs, and other overheads. The report further investigates the potential causes for these variances, such as changes in room availability due to renovations, ineffective marketing campaigns, and economic fluctuations affecting labor and resource costs. Finally, the assignment suggests actionable strategies to rectify identified issues, including periodic performance reviews, targeted advertising, price adjustments, and menu innovations, with the aim of improving financial performance and aligning actual results with budgetary expectations. Desklib offers a wealth of similar solved assignments and study tools to support students.

Running head: PREPARE AND MANAGE BUDGETS
Prepare and manage budgets
Name of the student
Name of the university
Student ID
Author note

1PREPARE AND MANAGE BUDGETS
Table of Contents
Task 1.........................................................................................................................................2
Task 2.........................................................................................................................................2
Answer 1 – Anticipated food revenue....................................................................................2
Answer 2 - Anticipated beverage revenue.............................................................................2
Answer 3 – Total revenue......................................................................................................3
Answer 4 – Overheads...........................................................................................................3
Answer 5 – Profit...................................................................................................................4
Answer 6 – Cost of goods sold..............................................................................................4
Answer 7 – Staff costs............................................................................................................5
Answer 8 – Other Overheads.................................................................................................5
Task 3.........................................................................................................................................6
Answer 1 – Variance..............................................................................................................6
Answer 2 – Investigation for variance...................................................................................7
Answer 3 – Suggested option to rectify the issues.................................................................8
Reference....................................................................................................................................9

2PREPARE AND MANAGE BUDGETS
Task 1
Follow the Excel sheet
Task 2
Answer 1 – Anticipated food revenue
Month
Customer
number Average food spend Total food spend
January 1850 $ 45.00 $ 83,250.00
February 2000 $ 37.00 $ 74,000.00
March 700 $ 42.00 $ 29,400.00
April 1200 $ 48.00 $ 57,600.00
May 1200 $ 36.50 $ 43,800.00
June 600 $ 35.00 $ 21,000.00
July 950 $ 34.00 $ 32,300.00
August 800 $ 38.00 $ 30,400.00
September 900 $ 29.00 $ 26,100.00
October 650 $ 29.50 $ 19,175.00
November 980 $ 35.50 $ 34,790.00
December 2200 $ 48.00 $ 105,600.00
Total $ 557,415.00
Answer 2 - Anticipated beverage revenue
Month
Customer
number Average beverage spend Total beverage spend
January 1850 $ 9.70 $ 17,945.00
February 2000 $ 9.70 $ 19,400.00
March 700 $ 9.70 $ 6,790.00
April 1200 $ 9.70 $ 11,640.00
May 1200 $ 9.70 $ 11,640.00
June 600 $ 9.70 $ 5,820.00
July 950 $ 9.70 $ 9,215.00
August 800 $ 9.70 $ 7,760.00
September 900 $ 9.70 $ 8,730.00
October 650 $ 9.70 $ 6,305.00
November 980 $ 9.70 $ 9,506.00
December 2200 $ 9.70 $ 21,340.00

3PREPARE AND MANAGE BUDGETS
Total $ 136,091.00
Answer 3 – Total revenue
Month Total revenue
January $ 101,195.00
February $ 93,400.00
March $ 36,190.00
April $ 69,240.00
May $ 55,440.00
June $ 26,820.00
July $ 41,515.00
August $ 38,160.00
September $ 34,830.00
October $ 25,480.00
November $ 44,296.00
December $ 126,940.00
Total $ 693,506.00
Answer 4 – Overheads
Month
Customer
number Average food spend Total food spend Overheads
January 1850 $ 45.00 $ 83,250.00 $ 74,925.00
February 2000 $ 37.00 $ 74,000.00 $ 66,600.00
March 700 $ 42.00 $ 29,400.00 $ 28,224.00
April 1200 $ 48.00 $ 57,600.00 $ 51,840.00
May 1200 $ 36.50 $ 43,800.00 $ 39,420.00
June 600 $ 35.00 $ 21,000.00 $ 20,160.00
July 950 $ 34.00 $ 32,300.00 $ 31,008.00
August 800 $ 38.00 $ 30,400.00 $ 29,184.00
September 900 $ 29.00 $ 26,100.00 $ 25,056.00
October 650 $ 29.50 $ 19,175.00 $ 18,408.00
November 980 $ 35.50 $ 34,790.00 $ 33,398.40
December 2200 $ 48.00 $ 105,600.00 $ 95,040.00
Total $ 557,415.00 $ 513,263.40
Month
Customer
number
Average beverage
spend
Total beverage
spend Overheads
January 1850 $ 9.70 $ 17,945.00 $ 16,150.50
February 2000 $ 9.70 $ 19,400.00 $ 17,460.00
March 700 $ 9.70 $ 6,790.00 $ 6,518.40
April 1200 $ 9.70 $ 11,640.00 $ 10,476.00
May 1200 $ 9.70 $ 11,640.00 $ 10,476.00
June 600 $ 9.70 $ 5,820.00 $ 5,587.20

4PREPARE AND MANAGE BUDGETS
July 950 $ 9.70 $ 9,215.00 $ 8,846.40
August 800 $ 9.70 $ 7,760.00 $ 7,449.60
September 900 $ 9.70 $ 8,730.00 $ 8,380.80
October 650 $ 9.70 $ 6,305.00 $ 6,052.80
November 980 $ 9.70 $ 9,506.00 $ 9,125.76
December 2200 $ 9.70 $ 21,340.00 $ 19,206.00
Total $ 136,091.00 $ 125,729.46
Answer 5 – Profit
Month
Customer
number Total revenue Overheads Profit
January 1850 $ 101,195.00 $ 91,075.50 $ 10,119.50
February 2000 $ 93,400.00 $ 84,060.00 $ 9,340.00
March 700 $ 36,190.00 $ 34,742.40 $ 1,447.60
April 1200 $ 69,240.00 $ 62,316.00 $ 6,924.00
May 1200 $ 55,440.00 $ 49,896.00 $ 5,544.00
June 600 $ 26,820.00 $ 25,747.20 $ 1,072.80
July 950 $ 41,515.00 $ 39,854.40 $ 1,660.60
August 800 $ 38,160.00 $ 36,633.60 $ 1,526.40
September 900 $ 34,830.00 $ 33,436.80 $ 1,393.20
October 650 $ 25,480.00 $ 24,460.80 $ 1,019.20
November 980 $ 44,296.00 $ 42,524.16 $ 1,771.84
December 2200 $ 126,940.00 $ 114,246.00 $ 12,694.00
Total 14030 $ 693,506.00 $ 638,992.86 $ 54,513.14
Answer 6 – Cost of goods sold
Month Customer number COGS
January 1850 $ 32,382.40
February 2000 $ 29,888.00
March 700 $ 11,580.80
April 1200 $ 22,156.80
May 1200 $ 17,740.80
June 600 $ 8,582.40
July 950 $ 13,284.80
August 800 $ 12,211.20
September 900 $ 11,145.60
October 650 $ 8,153.60
November 980 $ 14,174.72
December 2200 $ 40,620.80
Total 14030 $ 221,921.92

5PREPARE AND MANAGE BUDGETS
Answer 7 – Staff costs
Month Customer number Staff costs
January 1850 $ 31,370.45
February 2000 $ 28,954.00
March 700 $ 12,666.50
April 1200 $ 21,464.40
May 1200 $ 17,186.40
June 600 $ 9,387.00
July 950 $ 14,530.25
August 800 $ 13,356.00
September 900 $ 12,190.50
October 650 $ 8,918.00
November 980 $ 15,503.60
December 2200 $ 39,351.40
Total 14030 $ 224,878.50
Answer 8 – Other Overheads
Month
Customer
number Overheads Other overheads
January 1850 $ 91,075.50 $ 27,322.65
February 2000 $ 84,060.00 $ 25,218.00
March 700 $ 34,742.40 $ 10,495.10
April 1200 $ 62,316.00 $ 18,694.80
May 1200 $ 49,896.00 $ 14,968.80
June 600 $ 25,747.20 $ 7,777.80
July 950 $ 39,854.40 $ 12,039.35
August 800 $ 36,633.60 $ 11,066.40
September 900 $ 33,436.80 $ 10,100.70
October 650 $ 24,460.80 $ 7,389.20
November 980 $ 42,524.16 $ 12,845.84
December 2200 $ 114,246.00 $ 34,273.80
Total 14030 $ 638,992.86 $ 192,192.44

6PREPARE AND MANAGE BUDGETS
Task 3
Answer 1 – Variance
Variance in customer number
Month Budget Actual Variance
January 1850 1573 -277
Februar
y 2000 1700 -300
March 700 595 -105
Variance in revenue from food department
Month Budget Actual Variance
January
$
83,250.00
$
64,493.00 $ (18,757.00)
Februar
y
$
74,000.00
$
64,600.00 $ (9,400.00)
March
$
29,400.00
$
24,990.00 $ (4,410.00)
Variance in revenue from beverage department
Month Budget Actual Variance
January
$
17,945.00
$
15,258.10 $ (2,686.90)
Februar
y
$
19,400.00
$
18,700.00 $ (700.00)
March
$
6,790.00
$
5,831.00 $ (959.00)
Variance in COGS - Foods and beverages
Month Budget Actual Variance
January
$
32,382.40
$
29,507.91 $ 2,874.49
Februar
y
$
29,888.00
$
26,656.00 $ 3,232.00
March
$
11,580.80
$
9,862.72 $ 1,718.08
Variance in staff cost
Month Budget Actual Variance
January
$
31,370.45
$
24,722.82 $ 6,647.63
Februar
y
$
28,954.00
$
25,823.00 $ 3,131.00
March $ $ $ 1,879.15

7PREPARE AND MANAGE BUDGETS
12,666.50 10,787.35
Variance in other overhead
Month Budget Actual Variance
January
$
27,322.65
$
21,532.80 $ 5,789.85
Februar
y
$
25,218.00
$
22,491.00 $ 2,727.00
March
$
10,495.10
$
8,938.09 $ 1,557.01
Answer 2 – Investigation for variance
Main objective of preparing the budget is to analyse the variance with the actual
revenue and expenses and finding out the reason for the deviation. Therefore, the operational
areas shall be investigated and periodically compared with the budget to assess the significant
deviation (Glantz, Slinker and Neilands 2016). Variances for the following aspects may
caused for the reasons mentioned below –
 Customer number – the main reason of unfavourable variance in customer number
was reduction in availability of rooms owing to renovation. Further, the customer
may have found same level of service in another hotel at lower cost or the
unfavourable variance may be due to season change. In addition to these the
marketing campaign of the company may have been ineffective (Schick 2015).
 Revenue from food and beverage – the reason of unfavourable variance was that the
company was too optimistic regarding the budget. Further, there may have been bad
review in media regarding the food quality of the Futura hotel. Another reason may
be the customers
 COGS – the favourable variance of COGS may cause due to healthier economy and
availability of resources at lower cost. Further, the lower COGS was due to less
competition in the market.

8PREPARE AND MANAGE BUDGETS
 Staff cost – the favourable variance of staff cost may cause due to worse economy
and availability of labours at lower cost. Further, the reason may be lower level of
competition which in turn, leaves less job options for the staff in the hotel industry
(Pilleboue et al. 2015).
 Other overheads – the favourable variance other overhead may due to efficient
management of overheads. Further, the application of new technology may have
resulted into lowering of overheads. In addition to these, using higher quality of
resources may have contributed to lower overheads as compared to budgets (Barr and
McClellan 2018).
Answer 3 – Suggested option to rectify the issues
To rectify the above mentioned issues the management are suggested the following –
 Periodic review for actual performance shall be compared with the budgeted
performance and the managers shall assess the performance accordingly.
 The controllable and uncontrollable variances shall be identified to take steps for the
controllable variances.
 To improve the sales revenue the managers shall conduct the advertising campaign in
different way. For instance, the travel agent may paid a percentage of commission
when they send customers to the hotels.
 While preparing the budget the previous period’s trend shall be taken into
consideration to minimize the gap between budget and actual amount.
 The price of the foods and beverages can be reduced to attract more customers
 The hotel can also introduce new menus from all over the world that will definitely
attract some food lovers.

9PREPARE AND MANAGE BUDGETS
Reference
Barr, M.J. and McClellan, G.S., 2018. Budgets and financial management in higher
education. John Wiley & Sons.
Glantz, S.A., Slinker, B.K. and Neilands, T.B., 2016. Primer of applied regression &
analysis of variance. McGraw-Hill Medical Publishing Division.
Pilleboue, A., Singh, G., Coeurjolly, D., Kazhdan, M. and Ostromoukhov, V., 2015. Variance
analysis for Monte Carlo integration. ACM Transactions on Graphics (TOG), 34(4), p.124.
Schick, A., 2015. The road to PPB: The stages of budget reform. In Public Budgeting (pp. 39-
56). Routledge.