Reference no: EM133507687

Prepare and Monitor Budgets

Assessment Task 1: Written Questions

QUESTION 1 What is an all of organisation/ master budget?

QUESTION 2 What is the main purpose of each of the following budgets:

QUESTION 3 List at least five (5) of the main functions and three (3) key features for each of the three (3) main accounting software applications listed below.
a) MYOB
b) QUICKBOOKS
c) XERO-ONLINE

QUESTION 4 What are the four (4) techniques most commonly used for making estimates of expense budgets?

QUESTION 5 In hospitality businesses such as cafes, restaurants, and bars, how often would you expect financial takings to be reported?

QUESTION 6 List (3) quick responses actions hospitality business management can take where significant shortfalls between budget and actual takings are reported in daily takings?

QUESTION 7 a) What are the five (5) main uses/roles of a budget?
b) What are the four (4) key uses/roles of financial reports for a business.

QUESTION 8 Provide a brief description of each of the four (4) following different approaches to budget management together with two (2) benefits and two (2) disadvantages of each approach-
a) Incremental budgeting
b) Activity-based budgeting
c) Value proposition budgeting
d) Zero-based budgeting

QUESTION 9 a) What are the five (5) key features of a "rolling budget" format?
b) What is the main nature of hospitality businesses that is the reason rolling budgets are particularly useful?

QUESTION 10 Provide a brief description of each of the following two (2) different approaches to negotiating budgets and two (2)advantages and two (2) disadvantages for each approach-
a) Top-down approach
b) Bottom-up approach

QUESTION 11 For hospitality businesses, (which include restaurants, accommodation and events businesses), identify the fifteen (15) main financial factors that need to be considered when preparing financial and statistical reports.

QUESTION 12 Identify seven (7) key internal sources of information that may be used as a basis for preparing a budget and forecasting income and expenditure.

QUESTION 13 Identify five (5) key external sources of information that may be used as a basis for preparing a budget and forecasting income and expenditure.

QUESTION 14 Identify the five (5) most common reasons for significant unfavourable deviations between budget and actual outcomes in hospitality businesses and list at least one action management could take to mitigate each.

QUESTION 15 List the three (3) common potential grant funding guidelines or limitations.

ASSESSMENT TASK 2: CASE STUDY/ROLEPLAYs

CASE STUDY
You are the Operations Manager of Comfy Inn, a small bed and breakfast owned by Marino Enterprises. Comfy Inn is located in country Victoria and was purchased by the company two years ago when the long term owners decided to sell. Comfy Inn was sentimental to John Marino and Betsy Smithas they used to stay there in their younger days. When it came onto the market, they snapped it up mainly for those sentimental reasons.
As Operational Manager the main responsibility given to you is to ensure that Comfy Inn maintains a positive cashflow. John Marino and Betsy Smith have advised you that they have no profit objectives for the short-term, but that Comfy Inn must conform with Marino Enterprise's finance policies including to-
• Produce a positive cash flow for the next 12 month period, and
• Maintain a positive balance in the Working Capital account at all times.
Some background on Comfy Inn - they are a small luxury homestay property that offers seclusion, privacy and romance for an adult's only stay. There are three cabins onsite; each fully contained. They provide a full breakfast in the main house and a full bar that is open for drinks and canapés from 4pm - 6pm on Friday, Saturday and Sunday afternoons. The bar is open on request at other times for snacks, coffee, tea, smoothies, soft drinks and alcohol purchases.
Marino Enterprises handles the marketing and sales promotions, control the maintenance , and pays for upkeep of the property grounds. They also pay for your salary as the Operations Manager in the corporate budget, which is therefore not required to be reported in the Comfy Inn budget.
Everything else is your responsibility as the Operations Manager. You employ your partner for 20 hours per weekas the breakfast cook. You also employ a casual cleaner for 20 hours per week. You reside onsite in the main house rent free with your partner and the cleaner as part of the wages and salary packages. Both your partner and the casual cleaner are very supportive and keen to do more to help you make the business a success and they are available to work more hours if needed at a negotiated rate of $25 per hour.
It is budget preparation time and Betsy has asked you to meet with her to discuss developing the budget, which needs to be completed within the next three (3) weeks
Betsy has provided you with last year's actual revenue received, broken down into accommodation, food and beverages.

REVENUE  ACTUAL for Previous Year (Year 0) Comfy Inn B&B
	LAST YEAR
	Accommodation	Food	Beverages	TOTAL
July	3,000	1,600	1,560	6,160
August	2,800	1,800	1,600	6,200
September	2,800	1,800	1,900	6,500
October	3,600	2,400	1,800	7,800
November	3,800	3,000	1,960	8,760
December	6,000	3,800	1,700	11,500
January	8,800	3,800	1,600	14,200
February	8,800	4,000	1,600	14,400
March	3,800	3,400	1,400	8,600
April	3,600	2,600	1,200	7,400
May	3,400	2,400	1,400	7,200
June	3,200	1,800	1,500	6,500
TOTAL	$53,600	$32,400	$19,220	$105,220

Activity 1 - prepare for the budget process

1. UseHandout Comfy Inn Meeting Notes templatefor this Activityto prepare for the meeting. You will also need to use this handout to record your notes during the meeting (in Activity 2).
2. Develop the scope of the budget that you consider needs to be prepared to meet the operating needs of the business.
3. Determine what data and other information you will need to develop the budget.
4. Prepare an email to Betsy (one of the owners), requesting a meeting to discuss-
• the proposed budget scope,
• how you intend to develop the budget and
• itemising what additional information you need.
5. Print the email as you will need to submit it as part of your submission

Activity 2 - Role Play 1: initial budget consultation

STUDENT ROLEPLAY INSTRUCTIONS
You will roleplay as the Operations Manager in the meeting with the owner's re[presentative Betsy (role played by your assessor) The meeting is for you to confirm the budget scope and gather the information you have requested for preparing your budget and allocating costs.
You will therefore need to actively participate in the meeting and ask questions to clarify the information.
Take notes of the information provided using the template provided: Handout - Comfy Inn Meeting Notes template.
Keep your notes as you will need them to complete the tasks following. You will not be required to submit the meeting notes as part of your submission, but accurate and detailed notes will be critical to be able to satisfactorily completeActivity 3 following.
General instructions for all role players include:
1) Participate in roleplay simulation/ acknowledge information provided
Specific script and roleplay instructions
1) for your role are provided following
2) your assessor has been provided separately specific instructions for the role of the co-owner which they will play, including the detailed responses to be provided to your questions.
Prior to the roleplay: you will need to access print the handout- Comfy Inn Meeting Notes template

Your assessor will also complete the Observation Checklistfollowing during the meeting.
During the meeting you must:
1. Agree / confirm the Budget Scope
2. Determine how the budget will be estimated
3. Identify the Marino Enterprises'' revenue growth objectives
4. Identify any significant internal factors with potential to impact on cash flows
5. Identify any significant external factors with potential to impact on cash flows
6. Gather the additional information needed to develop the budget-
• amount of working capital available
• Marino Enterprises' revenue growth objectives for the budget period
• Details of any sales and/or marketing activities planned for the budget period
• The previous 12 months cash outflows data
7. Determine any other budget assumptions that should be used

Activity 3 - develop a draft budget

1. Enter the previous year's revenue data and the relevant revenue assumptions into Sheet 1 "Revenue Budget Year 1" in the Microsoft Excel workbook provided to prepare the Revenue Budget. (Enter data in the blue coloured cells only.)
2. Enter the price increase assumptions and volume increase assumptions as agreed during your Budget meeting with Betsy Smith. Your Revenue budget for the next year will be then automatically calculated by the worksheet formulae.
Note that the revenue budget figures will automatically be linked to the draft budget following inSheet 2 "Draft Budget Year 1".
3. Print the Revenue Budget as you will need to submit it as part of your submission.
[If you are confident with your result, you only need to print the final Revenue Budget. However if you are unsure of your result, it is suggested that you print the whole worksheet to show your inputs, which would assist the Assessor locate / identify any errors]
It is recommended that you check your Revenue Budget for Year 1 with your assessor before proceeding to the next steps in this Activity.
4. Once you have you Revenue Budget established, you then need to commence developing your full draft Cashflow budget. Using the next worksheet "Draft Budget Year 1", enter the required information into the blue coloured cells on that worksheet from the information gathered during your budget meeting with Betsy Smith. You should now be able to enter each of the following data-
• Working Capital opening balance
• COGS %
• Overhead contribution (yearly amount)
• Advertising (yearly amount)
• Laundry expenses (monthly amount)
• Insurance (yearly amount)
• Property lease (monthly amount)
• Repairs & maintenance (yearly amount)
• Miscellaneous (monthly amount)
• Wages & salaries %

5. Review your draft budget, paying particular attention to the Closing Cash Balance c/fwd each month, which must always remain positive, to comply with the overriding Marino Enterprise's finance policies to-
• Produce a positive cash flow for the next 12 month period, and
• Maintain a positive balance in the Working Capital account at all times.
It is recommended that you check your draft Budget for Year 1 with your assessor before proceeding to the next steps in this Activity.
6. In your budgeting you would the opportunity like to include replacing-
i. some linen and towels at a once off cost and outgoing of $3000, and
ii. kitchenware at a once off cost and outgoing of $2000
at the earliest opportunity but without placing the working capital balance into overdraft (i.e. negative balance c/fwd).
As these are discretionary expenditures under your control, you will need to consider when you are able to include each of these expenditures in your budget, being at the earliest opportunity the working capital balance will accommodate them.
Now allocate each of these discretionary costs to the appropriate month(s) which show the earliest opportunities for each to be included. Enter into the appropriate months to complete the draft budget and then print it to include with your submission.
7. Prepare an email to send to management attaching the draft budget you have prepared to ask for their input and requesting a meeting to finalise the budget. Copy your partner and the live-in cleaner as your work colleagues to also give them the opportunity for input.
8. Print or screen shot the email and the draft budget you have prepared as you will need to submit them as part of your submission.

Activity 4 - Role Play 2: consulting stakeholders to finalise the budget

STUDENT ROLEPLAY INSTRUCTIONS
You will roleplay as the Operations Manager in a 2nd meeting with Betsy (role played by your assessor), and with other Marino Enterprises' managers and staff (role played by other students), to present your draft Cash Flow budget and seek input, discuss desired outcomes, negotiate and finalise your budget.
You will chair this meeting and be required to actively participate and answer questions where necessary to clarify your draft budget.
Roleplay Cast:
As a minimum the following individuals will be at the meeting;
- Betsy Smith, Comfy Inn co-owner (Assessor)
- John Marino, co-owner (other student)
- Manager of another Marin Enterprises business, Ellia Hotel (other student)
- Manager of another Marin Enterprises business, Champions Sports Bar (other student)
Your Assessor will ask other students (not being assessed during this simulated meeting), to play the various roles.
General instructions for all role players include:
1) Participate in discussions about the budget assumptions
2) Participate in discussions about the draft budget outcomes
Specific script and roleplay instructions
1) for your role are provided following
2) your assessor will provide a general script to the other participants for each role to be played.

During the meeting you must:
1. Discuss changes to income and expenditure priorities
2. inform the meeting about resource decisions
3. Promote awareness of the importance of budget control
4. Discus techniques to maximise budget performance
5. Support estimates with valid, reliable, relevant information
6. Negotiate budget outcome effectively, and show readiness to incorporate modifications
7. Actively participate in consultation and seek feedback, discuss options and recommendations clearly, liaised and negotiate effectively
8. Respond appropriately to all questions

Activity 5 - finalise the budget
1. Use Sheet 3 "Final Budget Year 1" to make changes and amend your draft budget to incorporate the outcomes of the 2nd meeting and to prepare the final budget and resource allocations.
2. Prepare an email to send to your partner and the live-in cleaner as your work colleagues to advise them of the final budget decisions and advising them of the expense areas that are under your direct responsibility and which you will need to report on.
3. Print or screen shot the email and the final budget you have prepared as they will be required as part of your submission

Activity 6 - monitor performance against the budget
It is now 5 months after the implementation of your budget and you receive the actual cash flow data to November. This is provided in Sheet 4 "Actual Data to November Year 1" in the Microsoft Excel workbook.
1. Review the actual data to November provided to answer:
a) What is the $ deviation between the budget and actual Working Capital balance at the end of November?
b) What is the % deviation between the budget and actual Working Capital balance at the end of November?
c) What two (2) factors brought about that deviation?
d) Assuming that December performance will improve and you will be able to meet the total budgeted amounts for revenue and outgoings, what would the Working Capital balance c/fwd. be at the end of December?
e) What action could you take regarding any discretionary expenditure outgoings?

2. Apart from Wages, what is the most significant ongoing variable cost that is under your control?

3. Review again the staffing information given in the case study to identify and make an evaluation of potential changes to rostering requirements that may make a positive contribution to the cashflow and help to alleviate potential future negative deviations if the revenues continue to fall below budget forecasts.
a) You have confirmed that your staff are willing and available to work full-time, what staff positions do you have available to allocate extra roster duties for?
b) If you were to reallocate the laundry tasks to in-house utilising your available staff, assuming their pay rates are $30 per hour, what would be the potential monthly saving to the budget?

4. Prepare a report to Betsy Smith, John Marino and Luigi Marino using the report template provided in Sheet 5 "Financial Report November"to report back the budget status at end of November and advise them of the actions you have taken in managing the budget.

Activity 7

It is now 6 months after the implementation of your budget and you receive the 6th months to December actual cash flow data. This is provided in Sheet 6 "Actual Data to December" in the Microsoft Excel workbook.
1. Review the deviations from the budget for the 6th month and for the year to date, and determine any further significant issues that may require attention/action.
2. Determine and investigate potential options for improvement and/to respond to any significant deviations.
3. Prepare a 2nd report to Betsy Smith, John Marino and Luigi Marino using the report template provided in Sheet 7 "Financial Report December"to report back the budget status at end of December 2019, and advise them of the actions you have taken in managing the budget.

Activity 8
It is now 7 months after the implementation of your budget and you receive the 7th months to January actual cash flow data. This is provided in Sheet 8 "Actual Data to January"

1. Review the deviations from the budget for the 7th month and for the year to date, and determine any further significant issues that may require attention/action.

2. Prepare a 3rd report to Betsy Smith, John Marino and Luigi Marino using the report template provided in Sheet 9 "Financial Report January"to report back the budget status at end of January, and advise them of the actions you have taken in managing the budget.

3. What budgeting format would improve the Comfy Inn budget management and reporting process through utilising more current data?

4. Prepare an email to Betsy Smith, John Marino and Luigi Marino re-iterating the importance of budget management and recommending the budget approach you nominated in your response to the previous question. I your email, list the five (5) benefits and two (2) disadvantages of adopting that budget format.