KII4026 BUDGETING

KINGSFORD INTERNATIONAL
INSTITUTE

ASSESSMENT 2
Table of Contents
Table of Contents.........................................................................................................................................1
Instructions to Learner................................................................................................................................2
Assessment instructions ........................................................................................................................... 2
Assessment requirements........................................................................................................................ 4
Demonstration (if applicable)....................................................................................................................4
Third Party Guide
 .........................................................................................................................................5 Assessment 2 -
Summative Assessments ...............................................................................................9 Section A: Skills
activity (Case Study) ................................................................................................... 10 Case study A
...............................................................................................................................................10 Task 1:
Monitor budgets............................................................................................................................. 11 Jackson
Hotel operational budget – June quarter............................................................................................ 11 Task 2:
Calculate variances....................................................................................................................... 13
Comparative analysis report....................................................................................................................... 14
Task 3: Question and answer.................................................................................................................... 16
Section B: Knowledge activity (Q & A) .................................................................................................. 17
Section C: Performance activity............................................................................................................. 19
PART 1 ............................................................................................................................................................. 19
Case study B.................................................................................................................................................. 19
Task 1: Interpret budget results............................................................................................................... 20
Comparative analysis report....................................................................................................................... 20
Bistro purchasing budget – May................................................................................................................ 21
Task 2: Investigate option to improve performance .......................................................................... 22
Task 3: Improve budget performance.................................................................................................... 24
Bistro labour budget – June quarter......................................................................................................... 25
Bistro staffing levels ..................................................................................................................................... 27
PART 2............................................................................................................................................................. 29
Case study C.................................................................................................................................................. 29
Task 1: Prepare a profit and loss statement ......................................................................................... 29
Bistro profit and loss statement – June quarter ..................................................................................... 30
Task 2: Prepare a statistical report ......................................................................................................... 31
Trend analysis report – June quarter........................................................................................................ 32
Task 3: Prepare a management report .................................................................................................... 0

KII4026 Budgeting Assessment 2 Instructions to Learner

Welcome to KII4026 Budgeting! This KII unit covers the following unit/s of competency.
SITXFIN003 Manage finances within a budget

Assessment instructions
Overview
Prior to commencing the assessments, your trainer/assessor will explain each assessment task
and the terms and conditions relating to the submission of your assessment task. Please consult
with your trainer/assessor if you are unsure of any questions. It is important that you understand
and adhere to the terms and conditions, and address fully each assessment task. If any
assessment task is not fully addressed, then your assessment task will be returned to you for
resubmission. Your trainer/assessor will remain available to support you throughout the
assessment process.
 Written work
Assessment tasks are used to measure your understanding and underpinning skills and
knowledge of the overall unit of competency. When undertaking any written assessment tasks,
please ensure that you address the following criteria:

• Address each question including any sub-points

• Demonstrate that you have researched the topic thoroughly

• Cover the topic in a logical, structured manner

• Your assessment tasks are well presented, well referenced and word processed •

Your assessment tasks include your full legal name in the provided cover page.

Active participation
It is a condition of enrolment that you actively participate in your studies. Active participation is
completing all the assessment tasks on time.

Plagiarism
Plagiarism is taking and using someone else's thoughts, writings or inventions and representing
them as your own. Plagiarism is a serious act and may result in a learner’s exclusion from a course.
When you have any doubts about including the work of other authors in your assessment, please
consult your trainer/assessor. The following list outlines some of the activities for which a learner
can be accused of plagiarism:

• Presenting any work by another individual as one's own unintentionally

• Handing in assessments markedly similar to or copied from another learner •

Presenting the work of another individual or group as their own work

• Handing in assessments without the adequate acknowledgement of sources used,

including assessments taken totally or in part from the internet.

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KII4026 Budgeting Assessment 2

If it is identified that you have plagiarised within your assessment, then a meeting will be
organised to discuss this with you, and further action may be taken accordingly.

Collusion
Collusion is the presentation by a learner of an assignment as their own that is, in fact, the result in
whole or in part of unauthorised collaboration with another person or persons. Collusion involves
the cooperation of two or more learners in plagiarism or other forms of academic misconduct and,
as such, both parties are subject to disciplinary action. Collusion or copying from other learners is
not permitted and will result in a “NS” grade and NYC.

Assessments must be typed using document software such as (or similar to) MS Office.
Handwritten assessments will not be accepted (unless, prior written confirmation is provided by
the trainer/assessor to confirm).

Competency outcome
There are two outcomes of assessments: S = Satisfactory and NYS = Not Yet Satisfactory

Once the learner has satisfactorily completed all the tasks for this module the learner will be
awarded “Competent” (C) or “Not yet Competent” (NYC) for the relevant unit of competency.
If you are deemed “Not Yet Competent” you will be provided with feedback from your assessor
and “will” be given another chance to resubmit your assessment task(s). If you are still deemed as
“Not Yet Competent” you will be required to re-enrol in the unit of competency.

Additional evidence
If we, at our sole discretion, determine that we require additional or alternative
information/evidence in order to determine competency, you must provide us with such
information/evidence, subject to privacy and confidentiality issues. We retain this right at any
time, including after submission of your assessments.

Confidentiality
We will treat anything, including information about your job, workplace, employer, with strict
confidence, in accordance with the law. However, you are responsible for ensuring that you do not
provide us with anything regarding any third party including your employer, colleagues and
others, that they do not consent to the disclosure of. While we may ask you to provide information
or details about aspects of your employer and workplace, you are responsible for obtaining
necessary consents and ensuring that privacy rights and confidentiality obligations are not
breached by you in supplying us with such information.

Assessment appeals process

If you feel that you have been unfairly treated during your assessment, and you are not happy with
your assessment and/or the outcome as a result of that treatment, you have the right to lodge an
appeal. You must first discuss the issue with your trainer/assessor. If you would like to proceed
further with the request after discussions with your trainer/assessor, you need to lodge your
appeal to the course coordinator, in writing, outlining the reason(s) for the appeal. For more
information please refer to our policy and procedures by visiting www.kii.edu.au/documents or
login to your LMS account by clicking the link
https://www.kiionline.edu.au/course/view.php?id=59.

Recognised prior learning

Candidates will be able to have their previous experience or expertise recognised on request.

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KII4026 Budgeting Assessment 2

Special needs
Candidates with special needs should notify their trainer/assessor to request any required
adjustments as soon as possible. This will enable the trainer/assessor to address the identified
needs immediately

Assessment requirements
Assessment can either be:
• Direct observation

• Product-based methods e.g. reports, role plays, work samples

• Questioning
The assessment activities in this workbook assess aspects of all the elements, performance
criteria, skills and knowledge and performance requirements of the unit of competency.

To demonstrate competence in this unit you must undertake all activities in this Assessment and
have them deemed satisfactory by the assessor. If you do not answer some questions or perform
certain tasks, and therefore you are deemed to be Not Yet Competent, your trainer/assessor may
ask you supplementary questions to determine your competence. Once you have demonstrated
the required level of performance, you will be deemed competent in this unit.

Should you still be deemed Not Yet Competent, you may have the opportunity to resubmit your
assessments or appeal the result.

As part of the assessment process, all learners must abide by any relevant assessment policies as
provided during induction (orientation). For more information refer to our assessment policies by
visiting www.kii.edu.au/documents or login to your LMS account by clicking the link
https://www.kiionline.edu.au/course/view.php?id=59.

If you feel you are not yet ready to be assessed or that this assessment is unfair, please contact
your assessor to discuss your options. You have the right to formally appeal any outcome and, if
you wish to do so, discuss this with your trainer/assessor.

Demonstration (if applicable)

Throughout this unit, you will be expected to show your competency of the elements through
demonstrations. Your trainer/assessor will have a list of demonstrations you must complete or
tasks to be observed. The demonstrations will be completed as well as the activities found in this
Assessment

An explanation of demonstrations:

Demonstration is off-the-job

A demonstration will require:

Performing a skill or task that is asked of you

• Undertaking a simulation exercise.

The demonstration will take place in the training environment. Your trainer/assessor will ensure
you are provided with the correct equipment and/or materials to complete the task. They will also
inform you of how long you have to complete the task.

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You should be able to demonstrate the skills, knowledge and performance criteria required for
this KII unit.

Third Party Guide

You should supply details of the third party to the assessor before you commence the
activities (see below), unless the assessor has already selected a third party themselves.
The assessor can then contact the third party in instances where they require more
evidence to determine competency, or they cannot observe certain tasks themselves.

The reasons to use a third party may include:

➢ Assessment is required in the workplace
 ➢ Where there are health and safety issues related to observation
➢ Patient confidentiality and privacy issues are involved.

If you are not employed, or able to complete demonstrative tasks in the workplace, you
will need to inform the assessor. They will be able to provide you with a simulated
environment in which to complete these tasks.

We would prefer that, wherever possible, these be “live” issues for your industry and
require application of the principles that you are learning as part of your training. Where
this is not possible, you and your third party should simulate the activity tasks and
demonstrations that you believe would be likely to arise in your organisation or job role.

Third party evidence can also be used to provide “everyday evidence” of tasks included
in your work role that relate to the unit of competency but are not a part of the formal
assessment process.

The third party is not to be used as a co-assessor – the assessor must make the final
decision on competency themselves.

Documents relevant to collection of third-party evidence are included in the Third Party
section in the Observations/Demonstrations document.

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Third party details (required information from the learner) A third party may
be required for observations or demonstrations; please provide details below of your
nominated third party and obtain their signature to confirm their agreement to
participate. This information will be required by your trainer/assessor in advance of
arranging any future observations or demonstrations.

Third party name:

______________________________________________________________

Position of third party:

______________________________________________________________
Telephone number:
______________________________________________________________

Email address:
______________________________________________________________

Declaration for nominated third party

I declare my intention to act as third party for (learner’s name here)
__________________________

Third party signature:_____________________________________

Date: ___________________

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ASSESSMENT COVERSHEET
Unit:

Course Name:

Assessment Tool: Assessment 2

Student must fill this section:

 Student Name:

Student ID:

Privacy Release “I give my permission for my assessment material to be used in

Clause: the auditing, assessment validation & moderation Process”

Authenticity “I declare that:

Declaration:
• The material I have submitted is my own work;
• I have kept a copy of all relevant notes and reference material
that I used in the production of my work;
• I have given references for all sources of information that are not
my own, including the words, ideas and images of others.”

Student signature: Date:

Assessment Completion Status

Attempt Satisfactory Non-Satisfactor Date Assessor’s

y Signature

Initial attempt • •

2nd attempt/Re • •
assessment

Feedback to student:

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Information for Student:

• All work is to be entirely of the Student.

• Read the instructions for each question very carefully.
• Be sure to PRINT your FULL name & LAST name in every place that is provided.
• Short questions must be answered in the spaces provided or follow the word limits as instructed.
• For those activities requesting extra evidence such as: research reports, ESSAY reports, etc. The student must attach its own
work formatted in double space, Arial 12 pts.
• All assessment tasks must be addressed correctly in order to obtain a competence for the unit of competency. • If the Student
doesn’t understand the assessment, they can request help from the assessor to interpret the assessment. • All assessments
must be submitted online. Login to www.kiionline.edu.au and follow the subject link to submit your assessments. Note that the
hard copy of the assessments will not be accepted.

Re-assessment of Result& Academic Appeal procedures:

If a student is not happy with his/ her results, that student may appeal against their grade via a written letter, clearly stating the
grounds of appeal to the Operations Manager. This should be submitted after completion of the subject and within fourteen days of
commencement of the new term.
Re-assessment Process:
• An appeal in writing is made to the Operations Manager providing reasons for re-assessment /appeal.
• Operations Manager will delegate another faculty member to review the assessment.
• The student will be advised of the review result done by another assessor.
• If the student is still not satisfied and further challenges the decision, then a review panel is formed comprising the
lecturer/trainer in charge and the Operations Manager OR if need be an external assessor.
• The Institute will advise the student within 14 days from the submission date of the appeal. The decision of the panel will be
deemed to be final.
• If the student is still not satisfied with the result, the he / she has the right to seek independent advice or follow external
mediation option with nominated mediation agency.
• Any student who fails a compulsory subject or appeals unsuccessfully will be required to re-enrol in that subject. The
cost of reassessment will be borne by the Institute. The external assessor will base his/her judgement based on principles of
assessment. These principles require assessment to be reliable, fair, practical and valid.
Academic Appeals
• If you are dissatisfied with the outcome of the re-evaluation process, you have a right to appeal through academic appeals
handling protocol.
• To appeal a decision, the person is required to complete the KII- Request for Appeal of a Decision form with all other
supporting documents, if any. This form is available via our website. The completed Request for Appeal form is to be
submitted to the Student Support Officer either in hard copy or electronically via the following contact details: Student
Support Officer, Kingsford International Institute (KII), Level 6, 128-136 Chalmers St, Surry Hills, NSW 2010, Email:
admin@kii.edu.au

• The notice of appeal should be in writing addressed to the Operations Manager and submitted within seven days of
notification of the outcome of the re-evaluation process.
• If the appeal is not lodged in the specified time, the result will stand and you must re-enrol in the unit. • In emergency
circumstances, such as in cases of serious illness or injury, you must forward a medical certificate in support of a deferred
appeal. The notice of appeal must be made within three working days of the concluding date shown on the medical certificate.
• The decision of Operations Manager will be final.
• Student would then have the right to pursue the claim through an independent external body as detailed in the students’
complaint / grievance policy.

“I understand all the above rules and guidelines for the assessment”

Full Name Signature Date (dd/mm/yyyy)

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KII4026 Budgeting Assessment 2

Assessment 2 - Summative Assessments

The summative assessments are the major activities designed to assess your skills,
knowledge and performance, as required to show competency in this unit. These activities
should be completed after finishing the Learner Guide. You should complete these as
stated below and as instructed by your trainer/assessor.

Skills, knowledge and performance may be termed as:

➢ Skills – skill requirements, required skills, essential skills, foundation skills

➢ Knowledge – knowledge requirements, required knowledge, essential knowledge,

knowledge evidence

➢ Performance – evidence requirements, critical aspects of assessment, performance

evidence.

Section A: Skills activity

The skills activity is designed to be a series of demonstrative tasks that should be assessed
by observation (by the assessor or third party, depending on the circumstances).

It will demonstrate all of the skills required for this unit of competency – your assessor will
provide further instructions to you, if necessary.

Section B: Knowledge activity (Q & A)

The knowledge activity is designed to be a verbal questionnaire where the assessor asks
you a series of questions to confirm your competency for all of the required knowledge in
the unit of competency.

Section C: Performance activity

The performance activity is designed to be a practical activity performed either in the
workplace or a simulated environment. You should demonstrate the required practical
tasks for the unit of competency and be observed by the assessor and/or third party, as
applicable to the situation. If the third party is required to observe you, you will need to
make the required arrangements with them.

If necessary, for the activities, you should attach completed written answers, portfolios or
any evidence of competency to this assessment

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Section A: Skills activity (Case Study)

Objective: To provide you with an opportunity to show you have the required skills for
this unit.

A signed observation by either an approved third party or the assessor will need to be
included in this activity as proof of completion.

This activity will enable you to demonstrate the following skills:

▪ Reading skills
▪ Writing skills
▪ Oral communication
▪ Numeracy skills
▪ Problem-solving skills
▪ Teamwork skills
▪ Technology skills

Case study A

The Jackson hotel has a bistro, two bars (public and sports), a drive-through and walk-in
bottle shop and TAB situated beside the sports bar.

You are the manager of JJ’s Bistro. 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 glasses walled areas are within view of customers seated in the rear section
of the bistro.

The hotel’s management team develop an operational budget for the business based on
previous budgets, anticipated business and any special projects, such as renovations or
new products. Each operational area within the hotel is given a departmental budget based
on organisational goals and their anticipated revenue and expenses.

Budgets are developed on a quarterly basis. Each department has quarterly and monthly
budget targets. Monthly budgets can be adjusted during a quarterly cycle if circumstances
within the department change.

The following events have taken place during the April 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 surplus in the market.
▪ Beer prices have risen slightly, again due to the drought leading to shortages of
ingredients and an increase in government taxes.
▪ A major wine supplier has been running an in-house promotional campaign, with staff
product knowledge training provided to help increase sales.
▪ The bistro menu changes to the new winter menu on May 1st. Its introduction is being
promoted in April throughout the hotel.

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KII4026 Budgeting Assessment 2
Task 1: Monitor budgets

▪ Review the Jackson Hotel operational budget – June quarter.

▪ Answer all questions based on the contents and outcomes of the Jackson Hotel
operational budget – June quarter listed below

Jackson Hotel operational budget – June quarter

April May June June quarter

$ $ $ $

Revenue

Food sales 116,800 127,750 120,450 365,000

Beverage sales 240,000 247,500 262,500 750,000

Tab commission 49,300 47,850 47,850 145,000

Total revenue 406,100 423,100 430,800 1,260,000

Cost of sales

Food purchases 48,180 49,640 48,180 146,000

Beverage purchases 84,000 86,625 91,875 262,500

Total cost of sales 132,180 136,265 140,055 408,500

Gross profit 273,920 286,835 290,745 851,500

Expenses

Accounting 2,700 3,000 4,300 10,000

Advertising/promotions 3,900 4,810 4,290 13,000

Bank charges 7,582 7,359 7,359 22,300

Cleaning contractor 7,451 7,451 7,451 22,354

Commission credit card 767 767 767 2,300

Small equipment replacement 833 833 833 2,500

Insurance 1,833 1,833 1,833 5,500

Laundry 347 357 347 1,050

Legal fees 1,280 360 360 2,000

Licence fees & permits 983 983 983 2,950

Motor vehicle expenses 500 500 500 1,500

 Maintenance 4,224 4,352 4,224 12,800

Printing & stationery 800 800 800 2,400

Rubbish removal 500 500 500 1,500

Communication 2,000 2,000 2,000 6,000

Training & development 1,190 1,155 1,155 3,500

Wages & on-costs 193,050 198,900 193,050 585,000

Utilities 12,000 11,647 11,647 35,295

Total expenses 241,941 247,608 242,400 731,449

NET PROFIT 31,979 39,227 48,345 120,051

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KII4026 Budgeting Assessment 2

Q1: List the hotel’s financial commitments under their correct cost category. Name at least
two commitments for each category (2.2)
⇨ Variable direct costs
⇨ Variable indirect costs
⇨ Fixed indirect costs
Variable direct costs
-Food purchases
-Beverage purchase
Variable indirect costs
- Commission Credit Cards
-Small equipment replacement
Fixed indirect costs
-Accounting
-Promotions

Q2: Name the top four cost categories the business has allocated the most funds too in this
budget period.

In this budgetary period, the company has committed the most money to the following top
four cost categories:
pay & overhead

total cost of goods sold

Gross income

Total outlay

Q3: Why have significant funds been allocated to these categories?

Discuss their importance to the business and consequences if inadequate funds are
allocated.
The Jackson Hotel has received significant funding for the following areas, which are
crucial to the company for the reasons listed below:

1. Wages and other costs: Because the hotel depends so heavily on its personnel to
offer services, uphold cleanliness, and guarantee client happiness, this is one of the
most important expenses for the company. A lack of money set aside for wages and
overhead expenses could lead to understaffing, which could worsen the quality of
the customer service provided, increase wait times, and possibly even result in legal
problems if labor laws are broken.
 2. Total cost of sales: Included in this category are the expenses related to buying food
and drinks. This category directly affects the hotel's gross profit margin, hence it is
crucial to allot enough money to it. Lack of funding might result in lowered food and
beverage standards or shortages, which would turn away customers and cost
businesses money.

3. Gross profit: The amount of money left over after paying for the cost of goods sold
(COGS) is known as gross profit, and it is a crucial financial indicator for any type of
organization. The amount of money that is allocated here must be sufficient to pay
for other operating costs and produce a net profit. If costs are not sufficiently
covered, insufficient allocation may result in a reduced net profit or even operating
losses.
4. Total costs: This category includes a variety of operating costs, such as utilities,
upkeep, and marketing. It's crucial to set aside enough money for this because these
costs are essential to maintain the firm operating properly and draw in clients. The
customer experience and overall profitability may suffer from neglected
maintenance, diminished marketing efforts, or even service interruptions if utility bills
cannot be paid as a result of inadequate allocation.
The business may have serious consequences if these groups receive insufficient funding. It may result in:

1. Reduced customer satisfaction and retention: Poor food and beverage quality or insufficient
staffing may result in disgruntled guests, hurting the hotel's reputation and repeat business.
2. Financial losses: A lack of finances for the cost of sales and expenses may lead to lower profits or
even losses, which could endanger the viability of the company.
3. Regulatory and legal issues: Underfunding of wages and overhead can result in legal and
administrative issues, such as violations of labor laws or employment conflicts.
4. Facilities deterioration: Lack of funding for upkeep can result in aging machinery and infrastructure,
which could eventually raise repair costs and jeopardize safety.
5. Underfunding marketing and promotions may result in lesser customer acquisition and, as a result,
decreased revenue due to ineffective marketing.
Q4: Using the same Course file Jackson Hotel operational budget review the Bistro
departmental budget – April.
You are holding a team meeting to discuss the financial targets provided in the
organisational and April bistro budgets.
What information do you need to communicate to the team to ensure they
understand the targets and goals to be achieved?
If you want to properly convey to the team at the meeting the financial targets and
goals from the April Bistro departmental budget, you should provide them the
following details:

1. Brief Budget Overview: To begin, provide a quick summary of the April departmental
budget for the Bistro, including the key revenue and spending statistics.

2. Share the Bistro's April revenue goals, including those for food and beverage sales
as well as any additional sources of income. Describe how these goals were
selected and why reaching them is important.
3. Budget allotted for expenses in April, including those for food purchases, employee
salaries, electricity bills, and other running costs, should be discussed. Describe the
importance of keeping costs inside your budget.
4. Net Profit Goal: Clearly explain the department's April net profit target for the bistro.
Insist that this be the Bistro's final yardstick for financial success.
5. Monthly and Quarterly Goals: Describe how the April budget fits into the overall June
quarter and annual goals. Describe how this monthly goal helps the department and
the company as a whole succeed.
6. Budget Variance Analysis: Describe the process used to examine budget variances.
Mention that the team will be informed of any necessary adjustments if both
favorable (exceeding targets) and negative (falling short of targets) variations are
closely tracked.
7. Important Forces and Influences: Give the budgetary data some context. Describe
the effects of outside variables on the budget, such as market conditions, supplier
promotions, and shifting client preferences.
8. Team Responsibilities: Clearly define the roles and duties that each team member
will play in attaining the goals. This could include financial targets for the culinary
crew, customer service benchmarks for each team member, and sales targets for
servers.

Q5: What techniques can you use to promote awareness of methods of controlling costs or
increasing sales so you can achieve budget targets?
 Achieving budget goals depends on raising awareness of ways to reduce costs and boost
sales. Here are some ways to convince your team to use these strategies and
effectively communicate them to them:

1. Training and Workshops: Hold workshops and training sessions to inform your employees
on cost-cutting and sales-boosting techniques. Use internal resources or outside
consultants to impart best practices and useful advice.
2. Regular Meetings: Arrange regular team meetings to go over budget-related issues
including cost management and sales expansion. Use these gatherings to generate ideas,
exchange success tales, and discuss problems.
3. Set attainable goals with your team in a collaborative manner. Divide your budget goals into
team- and individual-based goals for cost cutting and revenue growth.
4. Establish and share key performance indicators (KPIs) that are directly related to cost
management and sales expansion. Make sure the team members are aware of how their
actions affect these KPIs.
5. Use visual aids to demonstrate the effect of cost-cutting and sales techniques on the
budget, such as charts, graphs, and infographics. Complex ideas can be easier to
comprehend when they are represented visually.
6. Case Studies: Disseminate case studies or success tales from the company or sector.
Showcase how effective cost-control and sales tactics produced profitable results.
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KII4026 Budgeting Assessment 2

Task 2: Calculate variances

• Review the comparative analysis report for the Bistro departmental budget • Complete the
comparative analysis report for the Bistro departmental budget – April by calculating all
missing dollar value and percentage variances.
• Complete the Favourable/Unfavourable column by indicating if the budget results are
favourable (F) or unfavourable (UF) for the business.
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Comparative analysis report

Bistro departmental budget – April

• Don’t forget to round your figures up or down to the nearest whole number.
April Favourable

Budget Actual Variance Variance /

Unfavoura

ble
 $ $ $ %

Revenue 14,716.8 / 105,120 x 100

Food sales 105,120 119,837 14,716.80 14.0% -

Beverage sales 89,250 96,390 7,140.00 - -

Total sales 194,370 216,226 21,857 - -

Cost of sales

Food purchases 40,953 45,048 - - -

Beverage purchases 27,563 30,043 (2,481) (9.0%) -

Total cost of sales 68,516 75,091 (6,576) - -

Gross profit 125,855 141,135 - 12.1% -

Expenses

Advertising/Promotions 780 624 156 20.0% -

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Cleaning contractor 1,490 1,490 - 0.0% -

Small equipment 333 393 (60) - -

replacement

Laundry 245 232 13 - -

Maintenance 1,493 1,262 - 15.5% -

Printing & stationery 160 195 - (22.0%) -

Training & seminars 408 653 (245) (60.0%) -

Wages & on-costs 85,901 98,771 (12,870)

Utilities 3,441 3,235 206 6.0% -

Total expenses 94,251 106,855 - 13.4% -

NET PROFIT 31,604 34,281 - - -

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KII4026 Budgeting Assessment 2

Task 3: Question and answer

Answer all questions based on the budget outcomes in the completed April budget
 comparative report in Task 2 and case study information.

Q1: Are there any significant variances in the sales figures that you should be concerned
about? Explain what the results indicate and why you are/are not concerned about
them.

In the April budget comparison report of the Bistro department, there are fluctuations in
sales numbers. Let's analyze these differences to determine if there are significant
problems:

Food sales:

● Budget: $105,120
● In fact: $119,837
● Difference: bargain $14,716.80 (14.0%)

Beverage sales:

● Budget: $89,250
● In fact: $96,390
● Difference: payable $7,140.00 (8.0%)

Total sales:
●
● Budget: $194,370
● In fact: $216,226
● Difference: affordable $21,857 (11.2%)
● The results show the following:

Food Sales Variance: A favorable food sales variance of $14,716.80 indicates that the
Bistro exceeded its food sales revenue goal by 14.0%. This is a positive result and
indicates strong performance in this category. This could be due to increased
customer demand, successful marketing efforts or effective menu changes.
Beverage Sales Variance: A favorable beverage sales variance of $7,140.00 indicates
that the Bistro exceeded its beverage sales goal by 8.0%. This is another positive
result that may be due to advertising, customer preferences or effective beverage
management.
Total Sales Variance: A favorable total sales variance of $21,857 indicates that Bistro
exceeded the total revenue target by 11.2%. This is a strong result because it includes
both food and drink.
Since all the deviations are favorable and contributed to the growth of the total
turnover, there is no immediate reason to worry about the sales numbers. These
differences indicate that the Bistro is effectively attracting customers and increasing
sales, which is generally a positive sign for revenue and profit. However, it is
important to be careful and attentive for the following reasons:

Sustainability: The bistro must assess whether these favorable fluctuations are
sustainable or are due to short-term factors such as seasonal changes or special
offers.
Cost control: Even if sales growth is positive, Bistro should monitor cost control so that
 sales growth does not lead to proportionally higher costs.
Profit Margins: Consider whether increased sales are reflected in improved profit
margins. Significant increases in costs can erode the benefits of increased sales.
Future Trends: Continue to analyze sales trends in the coming months to determine if
these fluctuations are part of a larger, ongoing trend or if they are one-offs. In
conclusion, although the sales figures for April show favorable fluctuations and are
generally a positive sign, Bistro must remain vigilant and monitor its financial results
to ensure that these results are sustainable and lead to better profitability in the long
term.

Q2: Are there significant variances in any of the expenses categories that you think should
be investigated further? If yes, discuss which categories and why you think they need
investigation. If no, discuss why the deviations do not warrant investigation.

In the April budget comparative report for the Bistro department, several expense categories have
variances. Let's assess whether any of these variances are significant enough to warrant further
investigation:

1. Advertising/Promotions:
● Budgeted: $780
● Actual: $624
● Variance: Favorable $156 (20.0%)
2. Small Equipment Replacement:
● Budgeted: $333
● Actual: $393
● Variance: Unfavorable $60 (18.0%)
3. Maintenance:
● Budgeted: $1,493
● Actual: $1,262
● Variance: Favorable $231 (15.5%)
4. Printing & Stationery:
● Budgeted: $160
● Actual: $195
● Variance: Unfavorable $35 (22.0%)
5. Training & Seminars:
● Budgeted: $408
● Actual: $653
● Variance: Unfavorable $245 (60.0%)

Promotions: A favorable 20.0% difference in this category is significant. Due to the favorable
variation, research may not be necessary, but it is important to ensure that the lower
consumption has not negatively affected sales promotion or marketing activities. Replacement of
Small Appliances: An unfavorable 18.0% difference suggests that spending in this category has
exceeded budget. This needs to be investigated to understand the reasons for the increase in
costs. This may include determining whether equipment unexpectedly needed to be repaired or
replaced. Maintenance: A favorable 15.5% variation in maintenance costs is significant and
indicates savings. Although this is positive, it is still worth investigating whether maintenance
measures were delayed or whether there were other factors contributing to the deviation.
Printing and Stationery: An adverse variation of 22.0% indicates higher than budgeted expenses.
It's worth investigating why these costs went over budget. This may include investigating
whether additional printing or stationery was required or whether there were inefficiencies in cost
control. Education and Seminars: The unfavorable variation of 60.0% is very significant. This cost
category was significantly over budget. Research is critical to understanding why training and
seminar costs have grown so much. This may include verifying the purpose and necessity of
these expenses. In summary, there are several cost categories, both favorable and unfavorable.
While favorable deviations are generally positive, they should be reviewed to ensure that they do
not compromise the quality or efficiency of operations. Adverse deviations require investigation to
identify root causes and assess whether corrective action is required. Effective budget
management requires understanding the reasons for these variations and taking appropriate
actions to ensure the financial stability and efficiency of the bistro department.

Q3: Based on your responses to questions 1 and 2, what is your overall evaluation of the
budget results? Is the bistro meeting its financial targets?

Based on the analysis of the sales indicators and cost categories of the April budget
comparison report, and taking into account the deviations discussed in questions 1
and 2, the overall assessment of the budget results of Bistro can be summarized as
follows:

Sales figures: In April, the Bistro exceeded its revenue target in food and beverage sales,
which led to favorable fluctuations. There is also a favorable fluctuation in total
sales, which indicates a strong sales development in the month. These positive
fluctuations are a positive sign.

Cost Categories: Although there are differences in some cost categories, most of these
 deviations are not a major concern. There is a favorable variance in operating
expenses and advertising, indicating effective cost management and possibly
effective marketing. Adverse fluctuations in small equipment replacement, printing
and stationery, and training and seminars require investigation, but are not large
enough to cause immediate financial difficulty.

Overall, the Bistro posted strong sales results in April, which bodes well for its ability to
attract customers and generate revenue. Although there are differences in expense
categories, most of these deviations are not worrisome and could be managed as
part of a broader financial plan. However, some cost categories require further
research to understand the reasons for the differences and ensure financial control.

In summary, the Bistro appears to be performing well in terms of sales figures and
although there are some external costs, the budget results do not indicate that
financial targets are not being met. However, constant monitoring and good
financial management are necessary for these results to be sustainable and
contribute to the long-term financial success of the Bistro.

Q4: Which expense category has the most funds allocated to it? Explain why it is
important you manage costs in this category carefully.

In the Bistro Department's April budget comparison report, the expense category
with the most funds allocated is "Salaries and Expenses." The budgeted
amount for this category is $85,901 and actual spending for April was
$98,771.

Cost management in the Salaries and Expenses category is crucial for several
reasons.

Significant Costs: "Salaries and overhead" usually make up a significant portion of

the operating costs of businesses in the restaurant industry. In this case, it is
the largest expense category that reflects a major financial commitment.
Labor intensive industry: Housing and food production is labor intensive. Labor
costs, including wages and benefits, can have a significant impact on a
bistro's overall cost structure. Labor regulations: Labor and employment
regulations are strict in many places. Failure to properly manage labor costs
can lead to legal and regulatory issues, including wage and hour violations,
which can result in fines and lawsuits.

Impact on profitability: Effective management of labor costs is essential to

maintain profitability. If labor costs are not controlled, they can reduce gross
margins and ultimately lead to financial losses.

Flexibility in Planning: Proper management of labor costs requires flexible and

efficient personnel planning. In this way, the Bistro can match the number of
employees to the needs of customers and optimize the use of labor.

Service Quality: Customer satisfaction in the restaurant industry is closely related

to service quality. Ensuring adequate and well-trained staff to serve
customers is critical to maintaining service standards and customer loyalty.

Employee Satisfaction: Satisfied and motivated employees are more likely to

provide excellent service. Careful management of labor costs includes fair
wages, benefits and training to retain qualified and committed employees.
Seasonal changes: The restaurant industry often experiences seasonal
changes in demand. Labor cost management is critical in adjusting staffing
levels during off-peak and off-peak hours to optimize costs and meet
customer expectations.

Cost Management Impact: Effective cost management can affect other cost
categories. For example, extra work can increase operating costs or increase
food waste.

Overall, "salaries and expenses" is a significant expense category that directly

affects the financial health of the Bistro and its ability to meet budget goals.
 Correct management of these costs ensures the financial sustainability of
the Bistro, high quality service, fulfillment of work orders and maintenance of
profitability.

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KII4026 Budgeting Assessment 2

Section B: Knowledge activity (Q & A)

Objective: To provide you with an opportunity to show you have the required knowledge
for this unit.

The answers to the following questions will enable you to demonstrate your knowledge of:

➢ Types of financial records:

o bank deposit documentation
o bank statements
o banking summaries
o business activity statements
o cheque books
o credit card transaction statements
o invoices
o journal entries
o labour and wages reports
o merchant statements
o merchant summaries
o transaction reports
➢ Types of budgets:
o cash budgets
o cash flow budgets
 o departmental budgets
o event budgets
o project budgets
o purchasing budgets
o sales budgets
o wage budgets
o whole of organisation budgets
➢ Factors for consideration in the preparation of financial and statistical reports:
o cash flow
o commercial account activity
o commission earnings
o covers and financial return
o daily, weekly and monthly transactions
o expenditure
o income
o occupancy rates and financial return
o performance of department, project and/or products and services
o sales performance
o sales returns
o staff costs
o stock levels
o variance in income and/or expenditure
o wastage
o yield
➢ Use, contents of and formats for:
o budgets
o financial reports
o statistical reports
➢ Budget terminology
➢ Specific industry sector and organisation:
o use of budgets to control costs and enhance profitability
o importance of budget control

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KII4026 Budgeting Assessment 2

o techniques for maximising budget performance

o financial reporting procedures and cycles
o features and functions of accounting software programs used to manage
budgets

Answer each question in as much detail as possible, considering your organisational

requirements for each one.

1. In your own words, explain what each of the following financial records show:

▪ Invoices
▪ Labour/wage reports
▪ Credit card transaction statements.

Invoices:

Invoices are financial documents that provide a detailed account of a transaction between a
business (seller) and a customer (buyer). They act as a formal request for payment for goods
or services supplied. Invoices usually contain important information such as the name and
contact information of the seller and buyer, the individual invoice number, the date of the
event, a description of the products or services sold, their quantities, unit prices, the total
 amount due, payment. . terms and possible taxes. Invoices are important for tracking income,
ensuring payments and recording business transactions for financial and tax purposes.

Labour/wage reports

Employment or payroll reports are financial documents that document the benefits and labor
costs paid to a company's employees. These reports usually include information about each
employee, such as their name, employee ID, job title, hours worked, pay rates, overtime,
bonuses and any deductions. They may also provide information about employee benefits,
withheld taxes, and net pay. Labor reports are necessary to control labor costs, ensure
compliance with labor laws and accurately calculate payroll costs. They help businesses
manage their workforce efficiently and maintain records for audit and tax purposes.
Credit card transactions:

Credit card transaction statements are financial information that credit card providers provide
to account holders. These statements detail all credit card transactions made during a
particular billing period. They usually include the date, location and description of each
purchase or transaction, along with the name of the merchant and the amount of the
transaction. The dispute resolution also shows the payment date, possible minimum payment
and the next payment date. Credit card transaction statements are essential for cardholders
to monitor their spending, monitor payments, track payments and pay on time. For
businesses, these statements are critical for tracking and reconciling credit card expenses,
ensuring accurate financial records, and tracking business expenses. This financial
information plays a key role in financial management and reporting and helps companies
maintain accurate financial information, make informed decisions and meet regulatory and
tax requirements.

2. Explain why having dedicated budgets for specific departments and projects can be
useful (as opposed to only relying on a budget for the whole organisation).

Allocating budgets to specific departments and projects can be very beneficial to an

organization for a number of reasons, rather than relying solely on an organization-wide
budget. Here are some of the main benefits.

Resource allocation: departmental allocated budgets allow resources to be accurately

allocated to each area of ​the organization. This ensures that each department or project
has the necessary funding to meet its specific needs and goals.

Cost control: Departmental budgets provide a clear financial framework for the
individual units of the organization. It encourages department heads or project
managers to control costs and manage resources effectively to meet budget goals.
Accountability: When each department or project has its own budget, it encourages
accountability. Department managers and project managers are responsible for
effectively managing their budgets and achieving financial goals.

Goal Alignment: Departmental and project budgets can be aligned with each unit's
specific goals and objectives. It ensures that financial resources are channeled to
achieve the desired results, whether it is increasing sales, improving efficiency or
launching a new product.

Performance Evaluation: Separate budgets make it easier to evaluate the performance

of individual departments or projects. By comparing actual results to budgeted
numbers, organizations can assess which units are meeting their financial goals and
which may need action or changes.

De-risking: Budgeting at the departmental or project level allows identifying financial

risks and challenges in each area. This allows proactively reducing risks and developing
 contingency plans.

Flexibility: Different departments or projects may have different financial needs and
fluctuations in income and expenses. Reserved budgets allow flexible adaptation to
changing circumstances and ensure that resources meet current requirements.
Motivation and Accountability: Department heads and project managers are more likely
to take responsibility for their budgets and financial results if they have their own
budget. This can increase motivation to meet or exceed budget targets.

Prioritization: With a separate budget, organizations can prioritize investments in areas

that have the most significant impact on their strategic goals. This allows for a more
strategic and targeted allocation of resources.

Communication: Reserved budgets encourage better communication within the

organization. Fire chiefs and project managers clearly understand their financial
parameters and can effectively communicate their needs and challenges to senior
management.

Financial transparency: each department or project can keep its own accounts, which
ensures transparency and accountability of the use of money. This is especially
important for auditing and compliance.

Decision-making: With their own budget, department heads and project managers can
make financial decisions that meet their specific requirements. This reduces the need
for constant centralized approval and streamlines decision-making processes. In
conclusion, while an organization-wide budget is essential, budgets allocated to
specific departments and projects provide precision and control that are invaluable in
achieving financial and strategic goals. They provide clear financial guidelines, promote
efficient allocation of resources, and enable better decision-making and performance
evaluation at the micro-level of the organization.

3. Why is it important to consider sales performance when monitoring budgets and

preparing financial reports?

Sales performance accounting is very important for tracking budgets and preparing
financial reports for several important reasons:

Revenue Generation: Sales are the primary source of revenue for most businesses.
Monitoring sales performance helps ensure that the organization is generating
expected revenues to cover costs and achieve profitability.

Sticking to the budget: Sales figures are a key part of the budget and comparing
actual sales with budgeted sales allows us to assess whether we are sticking to
the budget. This helps determine if the organization is on track to achieve its
financial goals.

Forecasting: Analyzing sales results provides insight into future revenue trends. By
looking at historical sales data, organizations can make informed forecasts and
adjust budgets to ensure they are realistic and in line with market conditions.

Resource Allocation: Sales performance directly affects resource allocation. High

sales may indicate a need to increase production, marketing or personnel, while
low sales may require cost reduction. Sales overview helps make resource
allocation decisions.

Marketing and sales promotion: Sales performance data helps companies evaluate
 the effectiveness of their marketing and sales promotions. This allows identifying
successful strategies and development goals.

Inventory management: Accurate sales data helps inventory management. If sales

are higher than expected, inventory levels may need to be increased to meet
demand. On the other hand, slow sales can lead to the need to reduce excess
inventory.

Cash Flow Management: Sales directly affect cash flow. Monitoring sales helps
ensure that the organization has enough cash to cover operating expenses and
potential financial obligations.

Trust of investors and stakeholders: Shareholders, investors and stakeholders are

interested in the financial status of the organization. Sales performance is a
critical indicator of organizational growth and sustainability. Reliable financial
reports, including sales data, increase the trust of these parties.

Budget adjustment: If the sales performance differs significantly from the budget, it
may be necessary to make budget adjustments. This may include revising sales
targets, reducing costs or reallocating resources to address financial gaps or
capitalize on opportunities.

Strategic planning: Sales effectiveness is all about strategic planning. Organizations

can make informed decisions about product offerings, market expansion, and
growth strategies based on historical and current sales data.

Identify trends: Analyzing sales performance over time helps identify trends and
patterns in customer behavior, market dynamics and product preference. This
information can guide future business decisions. Competitive analysis: Tracking
the development of sales allows companies to assess their competitive position
in the market. To stay competitive, it's important to understand how sales
compare to industry benchmarks and competitors.

Performance Evaluation: Sales performance is often used as a key performance

indicator (KPI) for employees and departments. This provides a clear measure of
success and achievement of sales goals.

In short, sales results are an important part of financial management. This affects not
only revenue generation, but also resource allocation, budget adjustment and
strategic planning. Regular monitoring of sales progress and inclusion in financial
reports is essential to making informed financial decisions and maintaining a
healthy and profitable organization.

4. What information is contained in the following document types:

▪ Budgets
▪ Financial reports
▪ Statistical reports?

Each document type serves a specific purpose in financial management and reporting and
contains different types of information:

Budgets:

Budgets are financial planning documents that describe an organization's financial

expectations and goals for a specific period, usually a fiscal year or shorter. They contain the
following information:

Revenue projections: Budgets provide projections of expected revenues, such as sales,

grants, and other revenue sources.
Cost projections: These describe expected costs, including salaries, operating expenses,
capital investments and debt service.
Budget categories: In budgets, income and expenses are classified in different categories or
departments, which allows resources to be allocated and monitored.
Budget period: These specify the period for which the budget is applied, such as monthly,
quarterly or annually. Budget targets: Budgets set numerical targets for revenue, expenditure
and, in some cases, key performance indicators (KPIs).
Variances: These often involve comparing budget figures to actual results to monitor
performance and identify variances.
Financial statements:

Financial statements provide a summary of an organization's financial performance and

position. They usually consist of the following components:

Income statement (income statement):

Income: Information about sales, interest, dividends and other income. Expenses:
breakdown of operating expenses, cost of goods sold and other expenses. Net Profit: The
difference between revenues and expenses, which indicates profitability. Balance sheet
(balance sheet):

Assets: Lists current and fixed assets, including cash, accounts receivable, real estate, and
investments. Liabilities: Information about current and long-term liabilities such as loans,
accounts payable and bonds. Equity: Indicates equity or equity that indicates the net worth of
an organization. Cash flow statement:

Business: Information about operating cash flows. Investment Activities: Detailed information
on cash flows related to real estate and securities investments. Financial activity: Information
about cash flows from borrowing, issuing shares or buying back shares. Appendices to the
financial statements:

Notes that provide additional information and context to the financial statements.
Management Discussion and Analysis (MDandA):

A narrative section where management provides an overview of financial results, trends and
future prospects. Statistical reports:

Statistical reports focus on non-financial data and metrics that are important for decision
making and performance evaluation. These usually include:

Performance measures: information on key performance indicators (KPIs) related to various

aspects of the organization's operations, such as customer satisfaction, sales growth, and
employee productivity.
Marketing Data: Information on market trends, customer demographics and competitive
analysis.
Performance metrics: non-financial data on production efficiency, quality and resource use.
Customer and sales data: Data on customer behavior, sales volumes and sales channels.
Employee data: metrics related to workforce performance, retention and training. Quality
and Safety Metrics: Information on product quality, safety information and compliance with
industry standards.
In summary, budgets focus on financial planning and forecasts, financial reports provide an
overview of financial results and status, and statistical reports provide an overview of the
non-financial aspects of an organization's operations. Each document type has a unique
purpose for financial management and decision making.
 5. Explain what the following budgetary terminology means:

➢ Revenue
➢ Financial commitment
➢ Debt.

Revenue:

Definition: Turnover, often called sales or turnover, is the total revenue an organization generates
from its core business. It represents money earned by selling goods or services to customers,
clients or other entities. Components: Revenues typically include various sources of income
such as sales revenue, interest income, rental income and other income directly related to the
organization's core business. Importance: Turnover is a key financial indicator and a critical part of
financial statements such as the income statement. It reflects an organization's ability to attract
customers, generate sales and sustain its operations. Increasing turnover is a common goal of
companies because it promotes profit and growth.
Financial commitment:

Definition: A financial liability refers to a contract or legally binding obligation that requires an
organization or person to make future payments or take measures to fulfill the contract. This
commitment can be related to expenses, investments, loans or any financial arrangement.
Examples: Financial obligations can vary, including:
Lease agreements: An obligation to pay rent for the use of real estate or equipment. Loan
agreements: a commitment to repay borrowed funds, often with interest. Purchase orders: An
obligation to purchase goods or services on agreed terms. Employment contracts: the obligation
to pay wages and benefits to employees. Importance: Recognizing and managing financial
obligations is essential to financial planning and budgeting. They represent future cash flow and
affect the organization's cash flow, financial stability, and budget constraints.
Debt:

Definition: Debt is a financial obligation that occurs when an entity borrows money from a lender
or creditor and promises to repay the loan over a period of time, often with interest. The loan can
be used for various purposes, such as financing investments, expanding operations or managing
cash flows. Types: Debt can come in many forms, including:
Bank loans: Borrowing money from financial institutions. Bonds: issuing bonds to investors.
Housing loans: A loan for the purchase of real estate. Trade credit: delaying payments to
suppliers. Importance: Debt is a common financial instrument used by organizations to finance
growth and operations. Debt management is critical to ensuring that an organization can meet its
repayment obligations without undue financial strain. Debt amounts and terms affect the
creditworthiness and financial risk of the organization. In summary, revenues represent income
from core activities, financial liabilities refer to binding commitments to make future payments or
allocate resources, and debt is a borrowed financial obligation that must be repaid over time with
interest. Understanding and mastering these financial concepts is the foundation of effective
financial planning and management.

6. Why is it important to promote budget control, and how can this enhance the overall
profitability of your organisation?

Promoting budget management is extremely important for an organization for a number

of reasons and can significantly improve overall profitability:

1. Cost control: Budget control helps organizations manage costs more effectively. By
following budgeted costs, companies can avoid overspending and identify areas where
savings can be made.
2. Financial Discipline: Budgetary control monitors financial discipline in an organization. It
encourages employees and departments to operate within their allocated budgets,
 reducing financial waste and inefficiencies.
3. Resource allocation: Budget management ensures that resources are allocated to the
most critical areas of the organization. This strategic allocation of resources can
improve productivity and revenue.
4. Profit maximization: By controlling costs and ensuring efficient use of resources, budget
management contributes to profit maximization. This allows organizations to keep more
of their revenue as profit.
5. Risk reduction: Budgetary control helps to identify and reduce financial risks. This
allows organizations to plan for contingencies, reducing the likelihood of financial crises
and losses. Operational efficiency: When departments operate within budget
constraints, they are motivated to find more efficient ways to complete tasks and deliver
services. This leads to better work efficiency.
6. Goal Alignment: Budgetary control ensures that financial resources are aligned with
organizational goals. It helps organizations direct money to areas that are essential to
achieving strategic goals.
7. Investor and stakeholder confidence: Effective budget control and the ability to
consistently meet or exceed financial targets increases investor and stakeholder
confidence. This can increase investment and support.
8. Creditworthiness: Strong fiscal control is a positive indicator for lenders and creditors.
Organizations that can demonstrate sound financial management are more likely to
receive loans on favorable terms.
9. Long-term sustainability: Budget control contributes to the long-term sustainability of
the organization. This prevents financial instability and allows the company to survive an
economic downturn. Cash flow management: Effective budget management supports
sound cash flow management. It is essential for meeting short-term financial
obligations, paying bills and taking advantage of investment opportunities.
10. Competitive advantage: organizations that manage their budgets well are often more
competitive in the market. They can offer products and services at competitive prices
and invest in innovation and growth.

Improve the overall profitability of the organization through budget management:

1. Set realistic budgets: Set achievable budgets based on historical data, market analysis
and realistic goals. Regular Monitoring: Continuously monitor financial performance
against budget. Identify time differences and take corrective action if necessary.
2. Cost Reduction Strategies: Develop and implement cost reduction strategies to reduce
costs without compromising quality or customer satisfaction.
3. Performance Incentives: Reward departments or employees for meeting or exceeding
budget goals. Incentives can improve financial performance. Flexibility: Allow some
flexibility in the budget to adapt to changing circumstances and opportunities.
4. Training: Ensure that employees and managers understand the importance of budget
management and have the skills to effectively manage budgets.

In summary, it can be argued that the support of budgetary control is crucial to the
financial health and profitability of an organization. It supports cost management,
resource allocation, risk reduction and operational efficiency, ultimately leading to
increased revenue and long-term sustainability.
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KII4026 Budgeting Assessment 2

Section C: Performance activity

Objective: To provide you with an opportunity to demonstrate the required performance
elements for this unit.

A signed observation by either an approved third party or the assessor will need to be
included in this activity as proof of completion.

This activity will enable you to demonstrate the following performance evidence:

➢ Manage a budget for a business over a three-month period that meets the specific
business’ needs
➢ Undertake at least two of the following to inform management of the above budget:
o discussions with existing suppliers
o evaluation of staffing and rostering requirements
o evaluation of impact of potential roster changes
o review of operating procedures
o sourcing new suppliers
➢ Monitor income and expenditure and evaluate budgetary performance over the
above budgetary life cycle
➢ Complete financial reports related to the above budget within designated timelines
and using correct budget terminology

Answer the activity in as much detail as possible, considering your organisational

requirements.

As a workplace activity or simulated workplace activity (as directed by the

assessor): PART 1

Case study B

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.

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KII4026 Budgeting Assessment 2

▪ 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.

▪ 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

Review the Bistro department 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.

Comparative analysis report

Bistro departmental budget – May
May

Budget Actual Variance Variance

$ $ $ %
 Revenue

Food sales 114,975 112,676 (2,299) (2)

Beverage sales 91,875 90,497 (1,378) (1.5)

Total sales 206,850 203,173 (3,677) (1.8)

Cost of sales

Food purchases 42,194 45,864 (3,671) (8.7)

Beverage purchases 26,775 29,399 (2,624) (9.8)

Total cost of sales 68,969 75,265 (6,294) (9.1)

Gross profit 137,881 127,908 (9,973) (7.2)

Expenses

Advertising/Promotions 962 981 (19) (2)

Cleaning contractor 1,490 1,490 - 0

Small equipment 333 288 46 13.7

replacement

Laundry 245 237 8 3.2

Maintenance 1,493 1,329 164 11.0

Printing & stationery 160 114 46 29.0

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KII4026 Budgeting Assessment 2

Training & seminars 396 713 (317) (80.0)

Wages & on-costs 89,345 103,283 (13,938) (15.6)

Utilities 3,494 3,456 38 1.1

Total expenses 97,766 111,891 (14,125) (14.4)

NET PROFIT 40,115 16,017 (24,098) (60.1)

Bistro purchasing budget – May

May

Budget Actual Variance Variance

$ $ $ %

Food purchases

Fruit & vegetables 5,063 5,970 (906) (17.9)

Dairy products 8,439 8,177 262 3.1

 Meat & poultry 14,768 17,662 (2,895) (19.6)

Fish & seafood 4,219 4,506 (287) (6.8)

Dry goods – food 7,595 7,511 84 1.1

Dry goods – other 2,110 2,038 72 3.4

Total food purchases 42,194 45,864 (3,670) (8.70)

Beverage purchases

Wine 4,820 5,359 (540) (11.2)

Spirits 4,016 4,185 (169) (4.2)

Beer, ciders – packaged 5,891 6,762 (872) (14.8)

Beer – keg 4,552 5,162 (610) (13.4)

Soft drinks, juices – 3,079 3,230 (151) (4.9)

packaged

Post mix 4,418 4,701 (283) (6.4)

Total beverage purchases 26,776 29,399 (2,625) (9.8)

Total cost of sales 68,969 75,265 (6,294) (9.1)

Food cost % 36.7% 40.7%

Beverage cost % 29.1% 32.5%

Cost of sales % 37% 33.3%

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 results of food and beverage sales and sales costs presented in the May comparative
analysis report significantly affect the bistro area and the entire business. We discuss
these effects according to the types of deviations (positive or negative) and the
magnitude of the deviations:

Food sales:

Negative Variance: Food items for May were $2,299 (2%) under budget. This suggests that
the bistro generated less revenue from food than expected. Impact on the bistro area:
A negative deviation in food sales means that the bistro may have experienced
reduced customer demand or lower average consumption per customer. It may also
reflect a change in customer preferences or a decline in customer numbers. Business
impact: A decrease in food prices will have a financial impact on the business. This
leads to lower total revenue and potentially lower profitability. A bistro's ability to cover
costs and have a positive impact on business results may be at risk. Beverage sales:

Negative Variance: Beverage sales for May were $1,378 (1.5%) below budget, indicating that
the bistro generated less revenue from beverage sales than expected. Impact on the
 bistro area: A negative deviation in beverage sales may indicate a decrease in
beverage consumption, a decrease in customer participation, or a change in consumer
preferences. Business Impact: Lower beverage sales will affect the overall bottom line
of the bistro and business. Since beverage margins tend to be higher, this deviation
may affect profitability more than the percentage difference would suggest. Bistro
customer satisfaction can also decrease if drink options are limited. Selling price:

Positive difference: Food and beverage sales expenses for May exceeded budget by $6,294
(9.1%). This indicates that the bistro had higher than expected food and beverage
costs. Effect on the bistro area: A positive deviation indicates that the food and
beverage costs for the bistro were higher, which may have been due to higher raw
material prices, changes in supplier costs, or the need to purchase larger quantities.
Business Impact: A positive deviation in cost of sales affects the overall profitability of
the bistro and the business. Higher costs lower the gross margin, which can
significantly affect net profitability. This highlights the importance of cost control
measures and supplier negotiations. Total sales and cost of sales:

Total Sales Variation: Total Sales Variation was negative at $3,677 (1.8%), indicating a
decrease in total revenue. Total cost of sales variance: Total cost of sales was a
positive $6,294 (9.1%), indicating higher acquisition costs. Impact on the bistro area:
The overall result of the bistro for May was affected by sales volumes and higher
costs. This may be due to several factors such as external market conditions, customer
behavior and operational efficiency. Business Impact: The combination of lower sales
and higher costs reduces the gross margin rate and overall profit of the bistro and
company. This highlights the need for effective cost control and revenue improvement
strategies. In short, it can be stated that deviations in food and beverage sales and
sales costs affect the financial performance of the bistro and thereby the profitability
of the entire business. These deviations require in-depth analysis and possible
changes in pricing, procurement strategies and marketing efforts to improve financial
performance.

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KII4026 Budgeting Assessment 2

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 difference in food and drink costs can be explained with information from the May
shopping budget, comparison report and case study. Two possible explanations
for these deviations are:

Food cost difference:

a) Higher ingredient costs: The May purchase budget shows that certain food
categories such as meat and poultry were significantly negative. The costs of
meat and poultry exceeded the budget by 19.6%. This suggests that meat and
poultry prices have increased, possibly due to the recent drought in some areas.
Drought can cause a shortage of feed and water for livestock, affecting meat
production and raising prices. In addition, floods or storms in other areas may have
disrupted supply chains, increasing costs.

b) Procurement quantity: Another possible explanation for the difference in food costs
is that the bistro may have procured larger quantities of certain ingredients due to
higher demand or to ensure supply during adverse weather conditions. This
increased acquisition volume could have resulted in higher costs. Drink price
difference:

a) Rising input costs: The May purchasing budget shows that there were negative
deviations in several beverage categories such as wine and packaged beer. Wine
costs were 11.2 percent higher than the budget, while the price of packaged beer
was 14.8 percent higher. The narrowness of the wine market and the scarcity of
raw materials due to the drought can lead to an increase in production costs and
thus to an increase in the cost of purchasing drinks.

b. Supplier pricing and contracts. The case study data mentions that a large wine
supplier organized an internal sales promotion campaign and trained employees.
Although this campaign aims to increase product awareness and sales, it can also
affect price negotiations. The supplier could have changed prices and possibly
increased costs as part of the promotional campaign, even if the employee
training was free.

It is important to note that both external factors such as market conditions (drought and
market saturation) and internal factors such as procurement decisions and
supplier contracts can affect food and beverage price differences. To effectively
manage these deviations, the bistro can consider renegotiating supplier contracts,
optimizing procurement strategies and closely monitoring market conditions to
make informed purchasing decisions.

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?
To determine if the bistro is meeting the organization's sales goals, we need to
compare budgeted cost percentages to actual results.
Food spending goal:

Percentage of budgeted food expenditure: 37% of food sales

Actual food cost percentage: (food purchase cost/food sales) * 100

Actual Food Cost Percentage = ($45,864 / $112,676) * 100 ≈ 40.7%

Difference between budgeted and actual food cost percentage:

Budgeted - Actual = 37% - 40.7% ≈ -3.7%

The actual percentage of food expenditure is approximately 3.7% higher than the
budgeted target. This suggests that bistro food costs exceeded the budgeted
target and the variance is negative.
The purpose of the beverage expense:

Budget beverage cost percentage: 30% of beverage sales

Percentage of actual cost of drinks: (cost of buying drinks / selling drinks) * 100

Percentage of actual tip costs = ($29,399 / $90,497) * 100 ≈ 32.5%

The difference between the budgeted and the actual beverage cost percentage:

Budget - Actual = 30% - 32.5% ≈ -2.5%

The actual beverage spend rate is approximately 2.5% higher than the budgeted
target, resulting in a negative variance.
In short, it can be said that the bistro does not meet the organizational objectives
of cost of sales. Both food and beverage cost percentages exceeded budget
targets with negative deviations. These deviations indicate that the bistro incurred
higher costs in relation to sales revenue than originally budgeted. To achieve
organizational cost of sales targets, the bistro may need to take cost control
measures, renegotiate supplier contracts or change pricing strategies to improve
cost efficiency and profitability.

Q4: Should these deviations be reported to management? Explain why/why not.

Yes, these food and beverage percentage differences must be reported to management. Therefore,
it is important to report them:

Financial transparency: The reporting of anomalies shows the transparency of financial

management. This ensures that management is aware of actual financial performance compared to
budgeted targets. This transparency is crucial for responsible financial management.

Decision Making: Management relies on accurate and timely information to make informed
decisions. Deviations in cost percentages can affect the profitability and overall business of the bistro.
Knowing these deviations allows management to take corrective actions and make strategic
decisions to solve problems.

Budget adjustments: When deviations are reported, management can consider whether budget
targets need to be changed. If spending percentages consistently differ from budgeted levels, it may
be necessary to make the budget more realistic and achievable.

Cost Control: Identifying and reporting deviations is the first step in cost control. Management can
use this information to identify the root causes of deviations and take cost control measures, such as
renegotiating supplier contracts, improving inventory or optimizing purchasing strategies.

Impact on profitability: deviations in cost percentages can have a significant impact on the
profitability of the bistro and the company as a whole. Management must understand the financial
implications of these deviations in order to assess the financial position of the company and take
steps to ensure profitability.

Accountability: Reporting deviations makes responsible parties accountable. Management can

determine whether deviations are due to internal decisions or external factors and take action
accordingly. It also helps identify areas or individuals who may need additional training or support.

Strategic planning: information about deviations can be used for strategic planning. Management
can use this information to set new goals, develop cost-effective strategies, and better align the
budget with the current business environment.
 In summary, it can be argued that the reporting of cost percentage deviations is essential for
informed decision making, financial transparency and proactive cost management. This allows the
management to deal with problems quickly, change the budget if necessary and ensure the efficient
operation of the bistro and a positive contribution to the achievement of the financial goals of the
company.

Q5: Based on the May purchasing budget, in what categories are the largest food and
beverage cost deviations occurring?

Based on the May Purchase Budget and Benchmarking Report, the largest deviations in
food and beverage costs occur in the following categories:

Food cost deviations:

Meat and Poultry: The largest difference in food costs is in the "Meat and Poultry"
category, with a negative difference of approximately $2,895 (19.6%). This
suggests that the actual costs of purchasing meat and poultry were significantly
higher than planned in the budget in May. Beverage price deviations:
Packaged Beer: The largest difference in beverage prices is in the "Beer, Cider -
Packaged" category, with a negative difference of approximately $872 (14.8%). This
suggests that the actual cost of purchases of packaged beer in May significantly
exceeded the budgeted amount.

Wine: The "Wine" category also had a significant negative deviation of approximately
$540 (11.2%). This suggests that the actual cost of wine purchases in May was
higher than budgeted.

These categories represent the areas with the largest cost variances. Management
must pay special attention to these categories and identify the causes of
deviations. Potential factors contributing to these differences may include market
conditions, supplier prices and supply decisions. By addressing the root causes of
these deviations, the bistro can strive to improve cost control and improve
financial performance.

Task 2: Investigate option to improve performance

The food and beverage manager is very concerned about the food and beverage
purchasing and cost of sales results. They want the bistro team to make it a priority to meet
budget targets for cost of sales in June. Management then plan to reduce budget
allocations for food and beverage purchases in the September quarter budget. It is an
organisational goal to reduce cost of sales to below the current percentages of 37% food
cost and 30% beverage cost. To meet June and September quarter budget targets, new
methods of managing costs must be investigated.

Go to your Course files folder and open Bistro May budgets.

Answer all questions based on the outcomes in the comparative analysis report Bistro
departmental budget – May, Bistro purchasing budget – May and case study
information.
 Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 21
KII4026 Budgeting Assessment 2

Q1: List four options for managing costs that could be applied to this situation.

Four cost management options to address food and beverage concerns and meet cost

of sales targets for the June and September quarters:

Supplier Negotiation: Initiate negotiations with current suppliers to secure more

favorable prices and terms. Find out about bulk purchases, prepayment discounts or

extended credit terms to reduce acquisition costs.

Product Substitution: Consider replacing some food and beverage items with more

cost-effective options that still meet quality and menu requirements. For example,

research cheaper cuts of meat or alternative drink brands.

Inventory Management: Implement advanced inventory management practices to

reduce waste and excess inventory. Ensure perishable products are used efficiently and

consider more accurate demand forecasting to avoid overstocking.

Menu planning: Analyze the menu to identify items with high food costs and low profit

margins. Customize menus by pricing, resizing or reconfiguring dishes to maximize

profitability and control costs.

Q2: You have decided to source new fruit and vegetable and seafood suppliers. Describe
how you would investigate if changing suppliers is a viable option for reducing your
cost of sales. How will you obtain information to determine if prices and product
quality from alternate suppliers are appropriate for your operation?

If you want to explore changing your fruit, vegetable and seafood supplier, you should
follow a structured process to assess the feasibility of this option.
Identify potential suppliers:

Research and identify potential fruits, vegetables and seafood at local markets. Ask
industry peers for recommendations, check online directories and contact
professional organizations. Contact suppliers:

Contact selected potential suppliers and express your interest in establishing a new
business relationship. Ask for detailed information about their product offering, prices,
delivery terms and quality standards. Supplier Evaluation:

Evaluate potential suppliers based on several factors, including:

Prices: Compare the prices offered by new suppliers with those of your current suppliers.
Make sure they are competitive and meet your budget goals. Product quality: Ask for
samples of the products they offer, such as fruits, vegetables and seafood, and rate
their quality. Do taste tests and visual inspections to make sure they meet your
standards. Reputation: Research the supplier's reputation in the industry. Check
customer reviews and references to gauge their reliability and quality of service.
Delivery and Reliability: Ask about their delivery schedules, processing times and
reliability to meet deadlines. Terms of negotiation:

Begin negotiations with selected suppliers to secure favorable prices and terms. Discuss
bulk order discounts, payment terms and delivery schedules. Be honest about your
cost-saving goals. Quality assurance and testing:

After selecting potential new suppliers, conduct a thorough product testing and quality
process. Run a pilot period where you order a limited number of products to assess
their quality and delivery consistency. Cost comparison:
Calculate potential savings by comparing the prices and terms of new suppliers with
existing suppliers. Make sure the savings match your budget goals. Delivery of
Suppliers:

Once the new suppliers meet the cost and quality requirements, begin the transition
process by contacting your current suppliers. Ensure smooth transition of orders and
deliveries. Continuous monitoring:

Continuously monitor the performance of new suppliers in terms of product quality, price
and reliability. Adjust your purchasing strategy as needed to maintain cost savings.
By following this research process, you can determine if switching fruits, vegetables
and shellfish is a wise choice to reduce selling costs and maintain product quality and
reliability.
Q3: You need to investigate which current suppliers have increased prices for products
and services, how much prices have risen and how much of the business’s financial
resources are allocated to existing suppliers.
What organisational financial documentation will provide this information?
To find out which current suppliers have increased the prices of products and services, the
extent of the price increase and the allocation of funds to existing suppliers, you can consult
some financial documents. The following financial documents can provide this information:

Supplier invoices and notices: Check the latest supplier invoices and price increase notices.
Invoices usually describe the cost of products and services, and bank statements can
summarize transactions over a period of time. Look for clear signs of price changes.
Purchase Orders: Control purchase orders issued to suppliers. They may provide information
about agreed prices for certain products or services. Compare purchase order prices with
previous orders to identify potential prices.
Accounts Payable Records: Accounts payable records and ledgers can show outstanding
payments to suppliers. Analyze changes in payment volumes over time and examine spikes in
costs associated with specific providers.
Supplier Agreements: Refers to existing supplier agreements or contracts. These agreements
may define price terms, price adjustment mechanisms, and the frequency of price changes.
They can provide information on whether and how suppliers are allowed to raise prices.
Budget Reports: Review budget reports, including department budgets or organization-wide
budgets. These reports may include target budget amounts for various cost categories, such
as supplier costs. Any budget deviations or increases in certain cost categories may be
indicative of supplier pricing. Financial statements: Analyze financial statements, including
income and balance sheets. These statements can provide insight into an organization's
financial performance and resource allocation. Look for trends in sales-related expenses and
cost of sales.
Expense Tracking Software: If your organization uses expense or purchase tracking software,
you can generate reports that break down expenses by vendor, expense category, and time
period. Such reports can help identify suppliers whose costs have increased. Communication
with the procurement or finance department: Contact the procurement or finance department
of the organization. They can monitor supplier communications, negotiations and price
changes. They can also provide information on recent prices.
Supplier Communication: Contact current suppliers directly and ask about recent prices.
Suppliers are often willing to discuss price changes and can provide documentation to
support their claims. By analyzing the information contained in these financial documents, you
can gain a comprehensive understanding of price increases related to suppliers, their impact
on the budget and the allocation of funds to existing suppliers. This information is very
important for cost control and supplier management strategies.
Q4: Your research has revealed that a number of other suppliers can supply similar quality
items at cheaper prices than your current supplier. Describe what you would discuss
with your current supplier before making a decision.

It is important to have an open and constructive conversation with your current supplier
before deciding to switch to cheaper suppliers. This is something you should discuss
with your current provider:

Reasons for seeking alternatives: Explain to your current supplier the reasons for
considering alternative suppliers. Be honest and upfront about cost savings goals and
competitive offers from other suppliers. Emphasize that this is a business decision and
not a reflection of dissatisfaction with their products or services.

Price Negotiation: Discuss the possibility of price negotiation. Ask if your current supplier is
willing to match or approach the prices offered by cheaper alternatives. This can give
them the opportunity to retain your business.

Contract and terms: Review your existing supplier contract or agreement, particularly any
clauses relating to pricing and price changes. Ask for clarification on the conditions for
price changes. If the contract allows for adjustments, ask about their intentions to use
the provision. Quality Assurance: Emphasize the importance of product or service
quality. Express your satisfaction with the quality of their offerings and the positive
aspects of the business relationship. Make sure price cuts don't compromise quality.
Service and Reliability: Discuss the vendor's track record of service reliability, on-time
delivery and meeting your business needs. Highlight areas where they have been
successful and how these factors influence your decision-making process. Long-term
relationship: If you have had a long-term and positive business relationship, express
your desire to continue it. A long-term partnership can be valuable for both parties.
Ask if they are willing to revise the terms of the relationship to meet your cost savings
goals.

Sustainability: Discuss sustainability initiatives as appropriate. Ask about their commitment

to sustainability and any eco-friendly practices. Sustainability is an increasingly
important factor for many companies and consumers.

Volume Commitment: If your company has the potential to increase purchase volumes in
the future, discuss this with your current supplier. They may want to adjust prices
based on increased volume commitments.

Open dialogue: Encourage open communication and a willingness to consider alternatives.

Ask if they have suggestions or strategies for reducing costs while maintaining quality.
Listen to their opinions and suggestions.

Decision Timeline: Be clear about the decision time frame. Let them know when you've
finalized your supplier selection. This transparency allows them to respond within your
time frame.

Exit strategy: Discuss the transition process if you decide to change providers. Make sure
 it's smooth and doesn't get in the way of what you're doing.

The purpose of this discussion is to maintain transparency, maintain a positive working

relationship and eventually reach a mutually beneficial agreement. However, be
prepared to switch to alternative providers if your current provider cannot meet your
cost requirements.

Q5: Who would you consult with before implementing any changes to the hotel’s
suppliers of fruits and vegetable and seafood products?

Before making any changes to the hotel's fruit, vegetable and seafood suppliers, it
is important to consult with key stakeholders and departments within the
organization. The following persons or groups should be consulted:

Manager and Beverage: The Food and Beverage Manager is responsible for the
procurement and procurement of food. They should be involved in the
decision making process as they have knowledge of product quality,
procurement and cost aspects.
Executive Chef: The Executive Chef plays a vital role in creating the menu,
developing recipes and ensuring that the quality of the food meets the
standards of the hotel. They can provide information on product quality and
special ingredient requirements. Purchasing Department: The purchasing
department is responsible for supplier relations, negotiations and
procurement processes. They can help evaluate potential suppliers,
negotiate terms and manage transitions to new suppliers.

Finance Department: The Finance Department is responsible for budget

management and cost management. They must be notified of any changes
to supplier contracts or prices, as these changes can affect budgets and
financial projections.

Operations Team: The operations team, including kitchen staff and servers, should
be notified of supplier changes as this may affect the availability of certain
ingredients and menu items. Their feedback on product quality and
availability is valuable.

Supplier representatives: Discuss price, quality and logistics with potential new
supplier representatives. They can provide information about their products,
conditions and how to meet the needs of the hotel.

General Manager: The General Manager oversees the overall operation of the
hotel and is responsible for ensuring that changes are in line with the hotel's
goals and standards. They must be notified of supplier changes. Guest
feedback: Consider guest or customer comments about the quality of food
and dishes. Customer feedback can provide valuable information about the
impact of supplier changes on the dining experience.
Legal Team: Depending on the complexity of supplier agreements and
negotiations, legal counsel may be consulted to ensure that the transition to
new suppliers complies with legal requirements and protects the interests of
the hotel.

Sustainability Committee: If the hotel has a sustainability committee, they can be

consulted to ensure that new suppliers adhere to the hotel's sustainability
goals and ethical procurement practices.

Involving these stakeholders and departments in the decision-making process will

help ensure that supplier changes are well communicated, diverse
perspectives are considered, and the hotel's goals for quality, cost savings,
and operational efficiency are met.

Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 22
KII4026 Budgeting Assessment 2
Task 3: Improve budget performance

▪ Review the Bistro labour budget – June quarter.

▪ Evaluate their impact on the operation and financial goals of the bistro.

▪ Answer all questions based on the labour comparative analysis report, staffing and
case study information.

Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 23
KII4026 Budgeting Assessment 2
Bistro labour budget – June quarter
Labour expenses April May June

Budget Actual Variance Budget Actual Variance Budget Actual

$ $ % $ $ % $ $

Total salaries 9,780 9,780 0 9,780 9,780 0 9,780 9,780

Total front of 45,053 52,171 (15.8) 47,382 55,105 (16.3) 44,804 51,260
house staff

Total kitchen staff 21,864 26,237 (20.0) 22,610 27,332 (20.9) 21,770 26,232

Total wages & 76,697 88,188 (15.0) 79,772 92,217 (15.6) 76,354 87,272
salaries

On-costs 9,204 10,583 9,573 11,066 9,162 10,473

Total labour 85,901 98,771 (15.0) 89,345 103,28 (15.6) 85,516 97,745
expenses 3

Percentage of 44.19 50.82 43.19 49.93 45.06 51.50

total sales

Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 24
KII4026 Budgeting Assessment 2

Q1: Complete the table below by inserting the variance percentage for each category in
each month.
Category Bistro labour budget – variance percentage

April May June June quarter

Salaries 0.0 % 0.0% 0.0% 0.0%

Front of house -15.8% -16.3% -14.4% -15.5%

Kitchen -20% -20.9% -20.5% -20.5%

Total labour -15.0% -15.6% -14.3% -15.0%

Q2: What do these statistics tell you about the bistro’s performance for the June quarter?
Explain what the variances mean and how this affects the department’s ability to meet
its financial goals.
Bistro's labor budget statistics for the June quarter reveal several important insights into the
bistro's performance and meeting financial goals:

Wage Gap (0.0%): Wage Gap indicates that the bistro met budgeted wage costs for all
 three months of the quarter. This means that the actual salary costs matched the
budgeted amounts. From a financial point of view, this is a positive result, as it shows
effective cost control in the area of ​salaries.
Front of House Difference (-15.5%): Front of House personnel cost difference is negative
-15.5%. This suggests that actual personnel costs were 15.5% lower than budgeted for
the June quarter. While this may appear to be a positive outcome in terms of cost
savings, it may have operational implications. A negative variance indicates that the
bistro may have had too few front-of-house staff, which can affect service quality and
customer satisfaction.
Kitchen Variance (-20.5%): The negative variance of kitchen personnel costs is -20.5%. As
with front of house, this means actual kitchen staff costs were 20.5% below budget
for the quarter. While this may indicate cost savings, it may also indicate that the
kitchen may have been understaffed, which could lead to slower service, quality
issues, or increased stress on existing staff. Total variance of labor (-15.0%): The
negative variance of labor cost for the quarter is -15.0%. This reflects an overall
reduction in labor costs compared to budget. While this can have a positive impact
on financial results, it can indicate operational issues such as understaffing or
overtime.
Taken together, the variations show that the bistro was able to control labor costs, but
significantly reduced labor costs, especially in the front of house and kitchen areas.
While this can help the bistro control costs and meet its financial goals, it can have a
negative impact on service quality, customer satisfaction and employee well-being. A
bistro must find a balance between cost savings and operational efficiency to ensure
a positive dining experience for customers. Negative variances indicate that staff may
need to be reevaluated to balance the bistro's financial goals and the quality of
service provided.

Q.3 Management think one reason for high bistro labour costs is the department is
consistently overstaffed; more staff than necessary are rostered on for most service
periods. Rosters have been reviewed and new staffing levels suggested for front of
house and kitchen areas. The number of customers served and sales revenue is
expected to remain relatively stable in the near future.
Review the bistro’s current and revised staffing levels in Bistro staffing levels table in
Bistro May budgets.
Here is a general approach to evaluating the impact of changed staffing levels.

Current Staff Numbers: Review current staff numbers and rosters to understand both
front office and kitchen staff numbers. Ensure staffing levels meet actual customer and
service requirements.
Changed Staffing Levels: Revise the number of staff provided for Front of House and
Kitchen. These levels should be based on a careful analysis of customer traffic, sales
forecasts and operational efficiency. The goal is to have the right number of employees
for service needs without additional staff. Stability of customers and sales: If the
number of customers served and sales revenue are expected to remain relatively
stable, it is important to adjust the number of employees accordingly. Too many
 employees can lead to unnecessary labor costs, while too few employees can reduce
the quality of service.
Balancing cost and service: Assess whether the changed staffing levels strike the right
balance between controlling costs and maintaining service quality. It is important to
avoid overstaffing, as this can increase labor costs, ensuring that the new workforce
meets customer needs and provides a positive dining experience.
Monitoring and adaptation: After implementing revised staffing rates, it is important
to continuously monitor their impact. If these changes result in cost savings without
compromising the quality of service, this can positively affect the bistro's financial
goals. However, if the quality of service suffers, further adjustments may be necessary.
Work and workload of employees: Consider how the changes will affect the work and
workload of employees. Overworked employees can lead to burnout and reduced job
satisfaction. The right staffing balance helps maintain a motivated and efficient
workforce. The most important thing is to align the number of employees with the
actual demand, customer service expectations and financial goals of the bistro. By
optimizing staffing in this way, a bistro can keep labor costs under control while
providing its customers with a quality dining experience.

Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 25
KII4026 Budgeting Assessment 2 Bistro staffing levels

No.
staff Monday Tuesday Wednesday Thursday Friday Saturday Sunday Front house Crnt Rvsd Crnt Rvsd

Crnt Rvsd Crnt Rvsd Crnt Rvsd Crnt Rvsd Crnt Rvsd Supervisor 2 0 0 1 1 2 2 2 2 2 2 2 2 1 1
Food Attendant FT 3 3 3 2 2 2 2 2 2 2 2 2 2 2 2 Food Attendant

Cas 10 2 1 2 1 3 1 4 2 6 4 8 6 7 6 Bar Attendant FT 3 1 1 2 2 2 2 2 2 3 3 3 3 2 2 Bar Attendant

Cas 4 2 1 1 0 1 0 1 1 2 1 2 1 2 1 Bus person Cas 2 1 1 2 1 2 1 Total rostered 8 6 8 6 10 7 11 9
16 13 19 15 16 13
Kitchen
Chef 1 1 1 1 1 1 1 1 1 1 Sous chef 1 1 1 1 1 1 1 1 1 1 1 Cooks FT 3 2 2 2 2 2 2 2 2 2 2 3 3 3 3
Apprentices FT 3 1 1 1 1 1 1 1 1 2 2 3 3 3 3 Kitchen hand Cas 4 1 1 1 1 2 1 2 2 3 1 3 1 3 2 Total

rostered 5 5 5 5 6 5 7 7 9 7 11 9 10 9

Glossary
Crnt Current staffing level FT Fulltime employee

Rvsd Revised staffing level Cas Casual employee

Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 26
KII4026 Budgeting Assessment 2

Q3: Discuss the impact these changes could have on customer service levels, your team
and budget targets. Consider both positive and negative outcomes

Proposed staffing changes can have multiple impacts on customer service, team, and
budget goals. Let's explore the possible positive and negative outcomes:

Positive results:

Cost reduction: Reducing the number of staff, particularly in roles such as bartenders, bus
attendants and kitchen staff, can lead to cost savings. This has a positive impact on
the budget targets, as labor costs are a major expense in the catering industry.

Better efficiency: With a more streamlined staff, the bistro can experience better
 operational efficiency. Employees can focus on their tasks more efficiently, which
leads to faster service and better customer satisfaction. Better team morale: In some
cases, overstaffing can cause employees to feel underutilized. By optimizing staffing
levels, team members can find their work more interesting and rewarding, leading to
higher morale.

Negative results:

Quality of service: One possible disadvantage is the risk that quality of service suffers.
Excessive undercutting can increase wait times, reduce customer satisfaction and
negatively affect the reputation of the bistro.

Increased workload: The workload of staff left behind after the changes may increase.
This can lead to burnout and reduced job satisfaction. High turnover or burnout can
negatively affect team morale and performance.

Adjustment period: The introduction of new staff may require an adjustment period.
During this time, there may be service interruptions and customer and employee
dissatisfaction.

Budgetary Goals: While downsizing can result in cost savings, it is very important to
ensure that the bistro does not downsize so much that it negatively affects sales and
revenue. If downsizing leads to fewer customers or less consumption, this can
reduce cost savings.

Overall, the impact of these staffing changes depends on the balance between reducing
costs and maintaining service quality. The bistro must closely monitor the impact of
these changes on customer satisfaction, employee morale, and budget goals.
Regular reviews and adjustments may be necessary to ensure staffing is optimized
to manage costs and provide an exceptional dining experience.
.

Q4: What payroll documentation can you use to maintain detailed records and monitor
funds allocated to labour costs during the budget period?

You can use a variety of payroll documents to keep detailed records and track the funds
allocated to labor costs during the budget period, including:

Timesheets: Timesheets record the number of hours worked by each employee. If

necessary, they help monitor attendance and overtime. Employees must fill out
worksheets accurately and have their supervisors check them.

Payroll: Payroll provides a summary of all employee earnings, deductions, and net pay
for a given pay period. These records help you understand your total labor costs
over a period of time. Payrolls: Payrolls, also known as wages, are issued to
employees with their wages. They break down the components of an employee's
compensation, including gross pay, taxes withheld, deductions, and net pay. Pay
slips help employees understand their income and deductions.

Employment contracts: Employment contracts specify the terms and conditions of

employment, including wages, benefits and working hours. These documents
help ensure that labor costs are in line with agreed terms. Attendance data:
Attendance data tracks the presence and absences of employees. They can help
identify patterns of absenteeism or tardiness that may affect labor costs.

Leave Requests: Information about employee leave requests and approvals is

important for tracking paid and unpaid leave. These documents ensure accurate
accounting of labor costs during absences.
 Payroll reports: Payroll reports provide a comprehensive view of labor costs, including
total wages, salaries, overtime and other components. They help track and analyze
labor costs.

Bank statements and transaction information: These documents show payroll

transactions, including direct payments and withholdings. They provide financial
information about labor costs.

Tax forms: Tax forms such as W-2s for employees and 1099s for contractors are
essential for compliance and reporting. They can also be used to cross-check
labor costs and retentions. Labor Cost Tracking Software: Using specialized payroll
or accounting software, you can maintain electronic records and generate reports
to efficiently track labor costs. These systems can automate calculations and
provide real-time insights.

Budget vs. Actual Reports: Regularly compare budgeted labor costs to actual costs.
This report helps identify variances and take corrective action when labor costs are
over budget. By maintaining and reviewing these payroll records, you can
effectively track work assignments, monitor budget execution, and make informed
decisions to control labor costs during the budget period.

Q5: During the initial investigation phase, with whom would you discuss the reasons for
changes to rosters and the desired outcomes of the changes?

During the initial research phase, as you review the list and discuss the desired
outcomes, you will typically interact with a number of stakeholders, including:
Bistro Management: This includes the Food and Beverage Manager, Restaurant Manager
or anyone directly responsible for overseeing the operation of the Bistro. They
should be consulted to understand their goals, concerns and expectations
regarding roster changes.

Frontline Staff: Speak directly to the front of house and kitchen staff working on the
bistro floor. Their input is valuable in understanding how organizational changes
may affect their work, as they can provide insight into the practical aspects of
customer service and kitchen operations.

Human Resources: HR professionals can help ensure that any changes to rosters
comply with labor laws, employment contracts and workplace policies. They can
also provide guidance on employee scheduling, vacation policies, and labor cost
management.

Finance Department: The Finance Department can provide insight into the financial
impact of roster changes. They can assess how changes in the number of
employees can affect labor costs and the overall budget. Financial professionals
can also provide guidance on budget constraints and compliance.

Unions or employee representatives: If your organization has unions or employee

representatives, they should be included in discussions about changes to working
arrangements. These stakeholders may have collective agreements and bargaining
rights that must be taken into account.
Customers: Gathering feedback from customers can help understand how menu
changes may affect their dining experience. Customer satisfaction is a crucial factor
in making changes in a service-oriented business like a bistro.

Restaurant Consultants or Experts: In some cases, it may be beneficial to consult outside

experts or restaurant industry consultants with experience in restaurant
optimization. They can provide information and best practices to improve service
quality and control costs. Current List Managers: If you have staff or managers
responsible for creating and managing lists, talk with them to understand the
current list process, potential challenges, and their suggestions for improvement.

Collaboration with these stakeholders ensures a holistic and informed approach to

change the list and achieve the desired results. It also promotes a shared
decision-making process that takes into account different perspectives and helps
create efficient, cost-effective lists that meet the needs of both the company and
its employees.

Q6: You believe the changes will have a negative impact on customer service standards
and food quality, leading to an increase in customer complaints. This could lead to
lower customer numbers and sales revenue over the next year.
You want to present your concerns to management and recommend smaller cuts to
staffing levels, especially to the front of house team during the busiest periods. Your
suggestions include better management of hours worked by casual staff and a review
of service procedures to streamline work practices.
Prepare a transcript of your recommendations to be presented to management at the
next management meeting.
Niranjan Thapa - Bistro Operations Manager

Dear ladies and gentlemen of the management team!

I would like to address some concerns about the recently proposed changes to our
staffing levels, particularly in relation to the front of house team during peak hours.
Although these changes are intended to reduce costs, they may adversely affect our
level of customer service and food quality, which in turn could lead to a decrease in
the number of customers and sales revenue in the coming year.
While we understand the need to control costs, I advocate a more balanced
approach that allows us to meet our budget goals without compromising the quality
of service we provide. Here are my recommendations:

Smaller cuts in the front of the house: Instead of making big cuts in the busiest
seasons, I recommend considering more modest cuts in the front of the house. By
maintaining an adequate number of staff during peak hours, we can ensure that our
customers receive the exceptional service they expect. Effective time management
of informal workers: We should focus on optimizing the working hours of our informal
workers. This would require strategic planning and job changes to align our staffing
levels with customer demand. By targeting our casual workers during the busiest
hours, we can maximize their efficiency and minimize labor costs.
Review of Service Procedures: We may improve our operating practices and service
procedures to improve overall efficiency. By improving our workflows and
communication between front of house and kitchen staff, we can serve our customers
more efficiently even with a slightly smaller number of people. Focus on quality
assurance: We must maintain our commitment to nutritional quality and customer
service. Reducing customer complaints and maintaining our reputation for excellence
should be a priority. Regular quality checks and employee training help us achieve
this goal.
Overall, it is important to strike a balance between budget constraints and high
service. I believe these recommendations will help us achieve that balance and
ensure we can continue to provide excellent customer service, preserve food and
meet our financial goals. I am open to further discussions and collaboration with the
team to effectively implement these suggestions. Thank you for your attention.
 Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 27
KII4026 Budgeting Assessment 2

PART 2

Case study C

It is the end of the June financial quarter and all departments in the Jackson’s hotel are
preparing financial and statistical reports.

Task 1: Prepare a profit and loss statement

Review the Bistro profit and loss statement

1. Complete the Bistro profit and loss statement – June quarter by calculating all missing
dollar value and percentage variances.

Monthly Actual Results:

May Food Sales: $119,837

June Food Sales: $112,676

July Food Sales: $110,356

May Beverage Sales: $96,390

June Beverage Sales: $90,497

July Beverage Sales: $84,630

Revenue:

Total Sales for June Quarter = Food Sales (June + July) + Beverage Sales (June + July)

Total Sales for June Quarter = ($112,676 + $110,356) + ($90,497 + $84,630) = $398,159

Cost of Sales:

Total Cost of Sales for June Quarter = Food Purchases (June + July) + Beverage Purchases
(June + July)

Total Cost of Sales for June Quarter = ($45,865 + $42,174) + ($29,399 + $23,827) = $141,265

Gross Profit:

Gross Profit for June Quarter = Total Sales for June Quarter - Total Cost of Sales for June
Quarter

Gross Profit for June Quarter = $398,159 - $141,265 = $256,894

Expenses:

Total Expenses for June Quarter = Advertising/Promotions (June + July) + Cleaning

Contractor (June + July) + Small Equipment Replacement (June + July) + Laundry
(June + July) + Maintenance (June + July) + Printing & Stationery (June + July) + Training
& Seminars (June + July) + Wages & On-Costs (June + July) + Utilities (June + July)

Total Expenses for June Quarter = ($981 + $884) + ($1,490 + $1,490) + ($288 + $372) + ($237
+ $283) + ($1,329 + $1,314) + ($114 + $145) + ($713 + $519) + ($103,283 + $97,745) + ($3,456
+ $4,190) = $215,013

Net Profit:

Net Profit for June Quarter = Gross Profit for June Quarter - Total Expenses for June
Quarter

Net Profit for June Quarter = $256,894 - $215,013 = $41,881

Variance Analysis:

Food Sales Variance = [($112,676 - $119,837) / $119,837] * 100 = -6%

Beverage Sales Variance = [($90,497 - $96,390) / $96,390] * 100 = -6.12%

Total Sales Variance = [($203,172 - $216,227) / $216,227] * 100 = -6.02%

Food Purchases Variance = [($45,865 - $45,048) / $45,048] * 100 = 1.81%

Beverage Purchases Variance = [($29,399 - $30,043) / $30,043] * 100 = -2.13%

Total Cost of Sales Variance = [($75,264 - $75,091) / $75,091] * 100 = 0.23%

Gross Profit Variance = [($127,909 - $141,135) / $141,135] * 100 = -9.36%

Expenses Variance = [($111,890 - $106,855) / $106,855] * 100 = 4.71%

Net Profit Variance = [($16,018 - $34,281) / $34,281] * 100 = -53.22%

The missing values and percentage variances have been calculated, and the profit and
loss statement for the June quarter is now complete.
 Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 28
KII4026 Budgeting Assessment 2

Bistro profit and loss statement – June quarter

Monthly actual results June quarter actual results

May June July Budget Actual

$ $ $ $ $

Revenue

Food sales 119,837 112,676 110,356 328,500 342,869

Beverage sales 96,390 90,497 84,630 262,500 271,517

Total sales 216,227 203,172 194,986 591,000 614,385

Cost of sales

Food purchases 45,048 45,865 42,174 124,100 133,087

 Beverage purchases 30,043 29,399 23,827 78,750 83,269

Total cost of sales 75,091 75,264 66,001 202,850 216,356

Gross profit 141,135 127,909 128,986 388,150 398,029

Expenses

Advertising/Promotions 624 981 884 2,600 2,489

Cleaning contractor 1,490 1,490 1,490 4,471 4,471

Small equipment 393 288 372 1,000 1,053

replacement

Laundry 232 237 283 735 751

Maintenance 1,262 1,329 1,314 4,480 3,905

Printing & stationery 195 114 145 480 454

Training & seminars 653 713 519 1,200 1,884

Wages & on-costs 98,771 103,283 97,745 260,762 299,799

Utilities 3,235 3,456 4,190 10,588.50 10,881

Total expenses 106,855 111,890 106,942 285,857 325,687

NET PROFIT 34,281 16,018 22,044 102,293 72,343

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KII4026 Budgeting Assessment 2

Task 2: Prepare a statistical report

▪ Complete the Trend analysis report – June quarter using the information provided. ▪

Save the completed reports locally and submit to your assessor once completed.

Comparison to Previous June Quarters:

June Quarter – Current (V %): This column shows the variance percentages for the

current June quarter compared to May, June, and July of the same year.

June Quarter – 200X (V %): This column shows the variance percentages for the

current June quarter compared to June, the same month in the previous year (200X).
June Quarter – 20XX (V %): This column shows the variance percentages for the

current June quarter compared to June, the same month in the year 20XX.

Variance 200X to Current (%): This column calculates the percentage variance from

June of the previous year (200X) to the current June quarter.

Variance 20XX to 200X (%): This column calculates the percentage variance from the

year 20XX to June of the previous year (200X).

Revenue:

Food Sales:

Compared to May: 14.0% increase

Compared to June of the previous year (200X): 1.8% increase

Compared to June of the year 20XX: 12.7% increase

Beverage Sales:

Compared to May: 8.0% increase

Compared to June of the previous year (200X): 1.5% decrease

Compared to June of the year 20XX: 12.9% increase

Total Sales:

Compared to May: 11.2% increase

Compared to June of the previous year (200X): 1.8% decrease

Cost of Sales:

Food Purchases:

Compared to May: 10.0% decrease

Compared to June of the previous year (200X): 8.7% decrease

Beverage Purchases:

Compared to May: 9.0% decrease

Compared to June of the previous year (200X): 9.8% decrease

Total Cost of Sales:

Compared to May: 9.6% decrease

Compared to June of the previous year (200X): 9.1% decrease

Gross Profit:

Compared to May: 12.1% increase

Compared to June of the previous year (200X): 7.2% decrease

Expenses:
Advertising/Promotions:

Compared to May: 20% increase

Compared to June of the previous year (200X): 2% decrease

Cleaning Contractor:

No variance

Small Equipment Replacement:

Compared to May: 18% decrease

Compared to June of the previous year (200X): 13.7% increase

Laundry:

Compared to May: 5.5% increase

Compared to June of the previous year (200X): 3.2% increase

Maintenance:

Compared to May: 15.5% increase

Compared to June of the previous year (200X): 11% increase

Printing & Stationery:

Compared to May: 22% decrease

Compared to June of the previous year (200X): 29% increase

Training & Seminars:

Compared to May: 60% decrease

Compared to June of the previous year (200X): 80% decrease

Wages & On-Costs:

Compared to May: 15% decrease

Compared to June of the previous year (200X): 15.6% decrease

Utilities:

Compared to May: 6% increase

Compared to June of the previous year (200X): 1.1% increase

Total Expenses:

Compared to May: 13.4% increase

Compared to June of the previous year (200X): 14.4% increase

Net Profit:

Compared to May: 8.5% increase

Compared to June of the previous year (200X): 60.1% decrease

This report shows the trend analysis for the June quarter, highlighting the percentage

variances in revenue, cost of sales, gross profit, expenses, and net profit compared to

previous months and years.

 Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 30
KII4026 Budgeting Assessment 2

Trend analysis report – June quarter

Monthly actual results Comparison to previous June quarters

May June July June June

quarter – quarter – q
current 200X

V% V% V% $ $
 Revenue

Food sales 14.0 (2) 1.8 328,500 286,781

Beverage sales 8.0 (1.5) 4 262,500 228,638

Total sales 11.2 (1.8) 2.7 591,000 515,418

Cost of Sales

Food purchases (10.0% (8.7) (6.2) 122,859 106,273

Beverage purchases (9) (9.8) 2.4 78,750 66,229

Total cost of sales (9.6) (9.1) (2.9) 201,609 172,502

Gross profit 12.1 (7.2) (2.7) 389,391 342,916

Expenses

Advertising/Promotions 20 (2.) (3) 2,600 2,275

Cleaning contractor 0 0 0 4,471 3,845

Small equipment (18) 13.7 (11.6) 1,000 890

replacement

Laundry 5.5 3.2 (15.4) 735 642

Maintenance 15.5 11 12 4,480 3,754

Printing & stationery (22) 29 9.2 480 453

Training & seminars (60) (80) (31.0) 1,200 1,062

Wages & on-costs (15) (15.6) (14.3) 260,762 219,822

Utilities 6 1.1 14.7 10,589 8,661

Total expenses 13.4 14.4 (13.8) 286,316 241,405

NET PROFIT 8.5 (60.1) (30.4) 103,075 101,511

Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 31
KII4026 Budgeting Assessment 2

Task 3: Prepare a management report

1. Prepare a short report to management outlining the following information.

▪ Positive and negative budget variations indicated in monthly and quarter

analysis reports and profit and loss statement that are significant enough to
affect the operation of the bistro and its profitability.

▪ Trends identified in the trend analysis report that have the potential to affect
the bistro’s profitability in the immediate future.

▪ Possible reasons for the positive or negative variations and trends.

 ▪ Any recent actions that have been taken or changes to operational procedures
as a result of trends and deviations.

Base the report on the following information.

▪ Profit and loss statement

▪ Trend analysis report

▪ April, May and June comparative analysis reports

▪ Case study information provided in the assessment 2

▪ Your responses to all questions in this assessment

The report should present information in a clear, concise and easy to understand
manner so it supports good decision-making processes.

Activity Report: Analysis of Bistro's financial results

Date: [date]

Recipient: management

From: Niranjan Thapa

Topic: Analysis of Bistro's financial results

In this report, we review Bistro's financial results for the June quarter and provide
an overview of positive and negative fluctuations, trends, possible causes of
these fluctuations and recent activities.

1. Positive and negative variations:

Positive variants:

Sales revenue in the June quarter increased by 11.2% compared to May, which
was mainly due to strong growth in food and beverages. This positive
development is due to the increase in customer demand. Gross margin
increased by 12.1% compared to May thanks to increased sales and effective
cost management. Negative Variations:
The result for the June quarter decreased by 60.1% compared to May, mainly
due to a significant increase in expenses, especially salaries and operating
expenses, which rose by 15.6%. Food purchase costs increased by 8.7%, which
had a negative impact on sales costs. Training and seminar costs decreased
by 80.0%, which indicates a decrease in personnel investments. 2. Trends:

Trend analysis reveals several key points:

In the last quarter, we noticed a fluctuation in turnover. Although sales increased

in June compared to May, the trend indicates that continued efforts are
needed to maintain customer demand. Gross margin is 7.2% lower than in May,
reflecting the impact of increased costs. 3. Possible reasons:

Positive variants:

The reason for increased revenue may be increased customer traffic, potential
offers or new menu items. An improvement in gross margin can be the result
of effective cost control measures. Negative options:

The decrease in net profit is due to significant salary costs and increased food
costs. A possible factor could be understaffing or overtime in the current team.
A decrease in training costs indicates a possible decrease in personnel
investments. 4. Recent activities:

Due to these trends and fluctuations, the following actions were taken:

Work lists were revised to eliminate potential redundancies and reduce payroll
costs. Possible renegotiations with food suppliers to ensure more effective
control of food costs. Conclusion:

The analysis shows that in order to maintain profitability, it is important to closely

monitor the number of employees, food costs and operational efficiency. To
meet these challenges, a thorough review of business methods and strategy
that focuses on customer demand is recommended.

We recommend continuous monitoring and adaptation to respond to changing

trends. Bistro performance is critical to a hotel's success, and addressing
these challenges will contribute to its long-term profitability. Please get in
 touch for more information and to discuss specific strategies.

respectfully

Niranjan Thapa

Kingsford International Institute |CRICOS: 03689D RTO: 45363 Jan 2020 v1.0 32