SITXFIN003 - Case Study Part 1

Case Study – Part 1
SITXFIN003 – Manage Finances within budget

Case Study – Part 1
Task 1: Monitor Budgets
Budget Report
List the hotel’s financial commitments under Variable direct costs Laundry Maintenance
their correct cost category. Name at least Variable Indirect Costs Wages Utilities
two commitments for each category Fixed Indirect Costs Rent Salaries
Name the top four cost categories the Wages & on-costs
business has Beverage purchases
allocated the most funds too in this budget Food purchases
period. Utilities
Explain why have significant funds been The organisation under concern is a hotel
allocated to these categories? which relies on beverage and food purchases
because these are the primary elements
through which the organisation operates.
Apart of that, a hotel also relies on its staff
including the waiters, floor manager and
other people who are the key to serve the
customers. Since all of these elements are
the primary things which form the base of a
hotel’s operations, significant funds have
been allocated to these categories.
Discuss their importance to the business and If significant funds are not allocated to these
consequences if inadequate funds are categories, the day-to-day activities cannot
allocated be performed. For example, of food and
beverages are not purchases enough because
of low funds allocated to them, the hotel
might not be able to serve food and
beverages to all the customers which can
significantly deter the reputation of the
hotel. On the other hand, of budgets are cut-
off from wagers, the employees might not be
happier with their salaries which can
consequently increase the turnover ratio that
will not be in the favor of the company.
Consider budget – April. The primary information to be
You are holding a team meeting to discuss communicated to the team are the budgets
the financial targets provided in the that are allocated to each aspect of the
organisational and April bistro budgets. financial plan for April. Once the team
understand the budgets allocated for
Explain what information do you need to each category, they will then need to analyse
communicate to the team to ensure they the sales data for previous months, the
understand the targets and goals to be budget plan and the actual financial expenses
achieved to analyse how the previous month i.e.
March performed in comparison to the
budget plan. This will help in identifying any
management mistakes conducted in the
previous month so that they can be avoided
in the current month.
Explain what techniques can you use to Following techniques can be used for
promote awareness of methods of promoting
controlling costs or increasing sales so you awareness of methods of controlling costs or
can achieve budget targets increasing sales so that the budgets targets
can be
achieved.
 A presentation can be conducted for
the team members in which the
techniques used for cost controlling
and budget reduction will be
emphasized so. The presentation will
mainly focus on the advantages of
these techniques and how they can
benefit the overall organisation.
 Other than the presentation, a
practical overview can also be
conducted which will make them
understand how the techniques work
and what will be their primary
benefits to the organisation. These
techniques include planning and
control, control reports and using
standards
Task 3: April – Budget Report

Document if there are any significant Y es, there exist significant variances in
variances in the sales figures that you the sales figure (including both the food
should be concerned about. If so explain and beverage sales) but it should be
what the results indicate and why you noted that there is nothing to be
are/are not concerned about them concerned about because the actual
figures are significantly higher than the
budgeted ones. For instance, the
budgeted sales figure for Food was
$105,120 and the actual figure is
$119,837 indicating a 14% variance that is
in favor of the company
List any significant variances in any of the In the wages and on-costs category under
expenses categories that you think should the “expenses” tab warrant investigation
be investigated further. If so, discuss from the financial team as it indicates
which categories and why you think they 15% variance when the actual values are
need investigation. If no, discuss why compared with the budgeted ones
the deviations do not warrant ($98,771 VS. $85,901). Usually, the
investigation salaries/wages of employees are fixed for
each month and when the budget plans
are compared the salaries and wages for
each of the employee is taken into
account. A significant increase in this
value warrant investigation as to what
were those factors which raised these
values.
Based on your responses to the above 2 Yes, the Bistro department is meeting its
contents, explain your overall evaluation financial targets which is evidenced by
of the budget results. Is the bistro the increased value of total revenue and
meeting its financial targets net profit for the overall month of April.
However, the cost of sales needs to
be controlled as the actual figures are
higher than the budgeted ones along with
the expenses (specifically the wages and
on-costs category).
Which expense category has the most The wages and on-costs category has the
funds allocated to it? Explain why it is most funds allocated to it. As explained in
important you manage costs in this Task 1, wages are an important aspect of
category carefully the company’s financial operations as a
decrease in it can increase the overall
turnover ratio which will not be in the
favor of the company. However, analyzing
the comparative budget report it is also
evident that the actual figures are
significantly higher than the budgeted
ones for which it is already recommended
that an investigation should be
conducted.
Using the results and information Responses to the provided questions are
obtained from the April comparative as follows;
report, your responses to the to the  Yes, the work area is meeting its
previous contents and the background budget target, except some
information, write a transcript of the categories, and is on track to meet
outcomes of your report ready to deliver the June Quarter budget. It is
to the bistro staff at the next team evident from the following
meeting. The transcript should information; the actual figures for
include the following information. the month of April for food sales
are $119,837, for the month of
 The current status of the budget; is May (budgeted) they are
the work area meeting its budget $114,975. Summing these two
targets, is it on track to meet June along with the figures for the
quarter budget targets? month of June (not provided
 Which areas are underperforming currently) will result in the total
or performing better than budgeted figure for the June
expected? Quarter i.e. $328,500.
 What changes, if any, need to be  The revenue category is
made to help the team meet next performing better than expected
month’s budget targets? and the cost of sales category is
 An outline of budget targets for underperforming. Other than that
May. variance in the wages and on-costs
 Organisational factors that is also higher.
contributed to the setting of these  The budget plan for May should
targets. focus on increasing the budgeted
figure for Beverages purchases
because in the month of April it
was $30,043 (9% more than the
budgeted), therefore, for May the
budgeted value should be
somewhat near this figure or some
mitigating factors should be
implemented to decrease this
value. Other than that, the wages
factor should be given particular
attention.
 Below are some organisational

factors that contributed to the
setting of these targets:
o The accounting and financial
standards being utilised by the
company’s management.
o Reinforcements used by the
company for motivating its
employees (money).
o Organisational culture
o The demographics of the
customers to which the hotel
targets.

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Case Study – Part 1

SITXFIN003 – Manage Finances within budget

Task 3: April – Budget Report

 Below are some organisational

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