SITXFIN003 Manage finances within a budget

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Melbourne polytechnic


SITXFIN003 Manage finances within a budget

Assessment No: 1

SITXFIN003|Manage finances within a budget

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SITXFIN003 Manage finances within a budget Assessment and Tutor Proposal

Manage finances within a budget


Task

Section 1 - Budgeting Exercise

The Preston Function Centre is a 300-seat venue catering for social functions (weddings, parties etc). Using an excel worksheet you are required to construct a month-by-month profit budget for the first quarter of the year using the following information:

SALES BUDGETS

Function numbers: Predicted functions for the first 3 months of next year are as follows:

Month 100 pax 150 pax 200 pax 300 pax
January 4 2 4 3
February 3 5 4 3
March 4 7 4 4
Pricing        
Pax 100 150 200 300
Food $90 $85 $80 $75
Beverage $30 $30 $30 $25
Cash Bar $5 $5 $5 $5

The function centre considers that it is reasonably priced and does not willingly negotiate their prices. In the case of an alcohol free function, they may reduce the price of beverages. The stated beverage prices include beer, wine and soft drinks.

The Function Centre also provides cash bars at most functions where customers can purchase spirits, mixed drinks and cocktails. They have estimated this “extra” revenue to be $5 per person attending every function (taking into account that at some functions people may spend a lot more than this, but at other functions patrons may not spend any extra on alcoholic beverages).

COST OF SALES

The menu is designed to produce a food cost of 28% of food revenue.

Beverage cost is expected to be 30% of beverage revenue.

PAYROLL COST

Permanent wages at the function centre cost $25,000 per month. Casual wages are budgeted to cost an additional 27% of total revenue.

OTHER OPERATING COSTS:

Other monthly operating costs are predicted to be:

Cleaning 5,000
Laundry & Dry-cleaning 1,500 plus 2% of Total Revenue
Cutlery, Crockery & Glassware 3,000
Linen 2,000
Uniforms 3,000
Advertising 12,000
Audit, Accounting & Legal Fees 2,800
Credit Card Commissions 1% of Total Revenue
Insurance 3,000
Printing & Stationery 950
Waste Removal 900
Repairs and Maintenance 2,000
Utilities (electricity, gas, water, phone) 6% of Total Revenue
Entertainment $500 per function

Section 1 Budget Data

  • Budget data worksheets for January
  • How do you calculate Revenue?
  • Number of customers (pax) =
  • Revenue for January
 
  Size Number Pax   Food Beverage  
Per person Revenue Per person Revenue  
  100     $90    

$30

   
  150    

$85

   

$30

   
  200    

$80

   

$30

   
  300    

$75

    $25    
          Cash Bar    
  Totals     Total     Total    
Cost of Sales Food            
Cost of Sales Beverage              

 

Casual Payroll (wages)

 

Credit Card Commission

 

Utilities

 

Entertainment

 

How do you calculate Profit?

 

Section 2 – Variance Analysis using Excel

 

In April the accounting records showed the following results for the 3 months ended March 31.

 

REVENUE

Food Revenue

681750

 

Beverage Revenue

291194

 

Cash Bar Beverage Revenue (included in this total) was $53 450

COST OF SALES

Food

218160

 

Beverage

91726

PAYROLL

Permanent

75000

 

Casual

296748

OTHER EXPENSES

Cleaning

12650

 

Laundry & Drycleaning

13350

 

Cutlery, Crockery & Glassware

9240

 

Linen

5845

 

Uniforms

8600

 

Advertising

39500

 

Audit, Accounting & Legal

8400

 

Credit Card Commission

9145

 

Insurance

9000

 

Printing & Stationery

2050

 

Waste Removal

2700

 

Repairs & Maintenance

5000

 

Utilities

77650

 

Entertainment

20500

 

The following information provided by the owner is relevant to your investigation:

 

There was a late cancellation for a 150 pax function in March that resulted in decreased food and beverage revenues. The manager was very angry that the organiser cancelled with insufficient time to resell the venue.

 

During January there were two alcohol free events: one was a child’s party. Due to this both clients negotiated a lower price per head for beverages.

 

A supervisor initiated a recycling drive, which has had some success so far in reducing printing and stationery costs.

 

There were some issues with some functions being overstaffed. When queried, the manager explained that it was due to a number of new employees who were not yet as productive as they should be.

 

One client in March complained about the unclean condition of the toilets during their function. A new head chef began working at the centre in early March.

 

One waiter commented that they were not able to sell a lot of beverages at a cash bar function as there was no entertainment provided: she thought the guests would have drunk more if there was some music to entertain them.

 

Required:

 

Using an excel worksheet, as per the template provided on moodle, enter the budget and actual results and calculate variances from budget (for both dollar, absolute percentage and relative percentage).

 

Section 3 – Variance Analysis, Written Report

 

Required:Analyse the results, examine the variance report and answer the questions below.

 

Suggested word count is 1500 to 2000 words.

 

  1. How has the function centre performed over the last 3 months? List and comment on the profit result and state the budget, actual and variance figures.<

 

  1. Why was the actual profit lower than the budgeted amount? List the main reasons. These are to be discussed in later questions.<

 

  1. What were the good results? Discuss at least 3, suggest a cause for each and what should be done for them to continue.<

 

  1. What were (at least 3) bad results? Which variances can be rectified by identifying the causes and implementing corrective action?<

 

  1. a/ What should the function centre do about the late cancellation?<

 

b/ Create a Cancellation Policy which details deposits, refunds and timings.

 

  1. a/ Comment on the cash bar. Was it successful?<

 

b/ How could it be improved? List and discuss 3 possible improvements.

 

c/ If the centre was to offer an all-inclusive beverage package, how much should this cost?

 

  1. a/ What are at least 3 possible reasons for the food cost variance?<

 

b/ What corrective actions (>3) would you recommend to reduce food costs?

 

c/ What discussions (>3) might you have with your suppliers to try to reduce food costs?

 

  1. a/ What are at least 3 possible reasons for the payroll variance? b/ What corrective actions (>3) would you recommend?<

 

c/ What impacts (>3) might rostering controls have on the service standards of your business?

 

  1. a/ If you decided that the budget was not accurate, how could it be improved?<

 

b/ With whom (>3) could you consult to improve the budget and its accuracy? What information could each of these people provide?

 

  1. a/ What recommendations (>6) do you have to improve performance within the Preston Function Centre? These actions could be related to increasing revenue, or reducing costs: please be very specific.<

 

b/ Which employees would need to be consulted to implement each of these recommendations?

 

c/ For each recommendation list the benefits that would result for the business. These may be financial, related to customer service or of some other benefit.

 

This question may be answered in a table format as per the following:

 

a/ Specific recommendation b/ Employees to be consulted c/ Benefits

 

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