Reference no: EM133108276

SITXFIN003 Managing Budgets - Brighton College

Assessment Task - Part A

Carefully read the following scenario and complete the following activities: You are the manager of 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. The B&B 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.

Some background on the B&B - 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 at other times for snacks, coffee, tea, smoothies, soft drinks and alcohol purchases.

Marino Enterprises looks after the property grounds and the manager's wage. Everything else is the responsibility of the manager who resides onsite in the main house. Your partner is employed as the short order cook and you pay a casual cleaner. As part of the onsite manager's role, you and your partner complete the general housekeeping duties when it is quiet.

It is budget preparation time and Betsy has asked you to meet with her to discuss the details.

Betsy has provided you with last year's actual revenue received, broken down into accommodation, food and beverages.

Betsy has also provided you with the following expenditure information that you will need to consider when preparing your cash flow budget.

This data has been sourced from historical data, committed costs for the B&B and Marino Enterprises policy:
• Marino Enterprises' overheads are $2000. All individual businesses and departments pay this overhead in August of each year.
• Lease payments are $1,500 monthly.
• Combined insurance coverage to increase to $1,400 per year paid in two equal payments in March and September.
• General repairs and maintenance to the property of $4,800 pa to be budgeted monthly.
• Digital marketing and advertising costs will be $2,400 pa, payable monthly.
• Charges for out-sourced laundering is $800 per month.
• Electricity charges are payable every quarter as follows:
• September: $2,200
• December: $2,000
• March: $2,400
• June: $3,000.
• General monthly miscellaneous expenses amount to $600/month.
You also know from your experience and the management of the property that:

• You need to replace some linen and towels at the cost of $2000 and replace kitchenware consumables to the value of $1000 at some point in the year. You will need to decide when it is best to include this expenditure in your budget along with an explanation to Betsy as to why you think it is best budgeted for in those months.
• The monthly cost of F&B stock is predicted to run at 40% of the food and beverage sales. You will need to calculate this cost into your projections.
• The cost of labour is calculated at 25% of all monthly sales. You will need to calculate this cost into your projections.

1. Prepare draft revenue budget
Betsy has asked you to enter the income and expenditure data she has given you plus your projections into your accounting system to prepare the draft revenue budget for the upcoming year. You may use Microsoft Excel spreadsheet. If you use spreadsheet software make sure you use the headings: income, cost of sales, gross profit, expenses and operating profit. Enter the data with 0 decimal places.

2. Email information of draft budget to Managers & John Marino
Prepare an emailthat you can send to the other managers at the B&B, and John Marino seeking their input and feedback. Inform them that you attach the draft budget (pretend only)and ensure that you provide them with enough information so that they can make a judgement of how and why you have allocated funds as you have.

You must write an email to the other managers and John Marino seeking their input and feedback. Tell them that the draft budget is attached, but give enough information in the email, so they can make a judgement of how and why you have allocated funds the way you have.

3. Prepare a Memo for approval from Betsy explaining the following:

• the extra expenditure for discussion and approval (beds and kitchen appliances)
• a discussion on the internal and external factors that could have an impact on the budget. Discuss at least three internal and three external factors.

Assessment Task - Part B

Carefully read the following scenario and complete the following activities:

Betsy has sent you an email with some changes to be made to the draft budget.
Betsy also thinks that you have over calculated the cost of stock and the wages at 25% is too high. She has asked you to consider options for reducing the cost of both without affecting customer service levels, the quality of product and of course the income.

1. Changes to budget
Provide at least three recommendations for changes to the budget that will satisfy Betsy's requests in a memo. It is your responsibility to meet the budget so you can choose to make recommendations to increase income, decrease expenditure wherever you see fit or even negotiate not to make any changes to the expenditure.

Make the changes to your budget in the accounting software or excel spreadsheet. Produce a final budget report and send a memo to Betsy outlining the changes you have (or have not) made with an explanation justifying your decisions. In your justifications include the advantages and disadvantages of accepting your changes. Submit your memo and finalised budget to your assessor by the due date.

a) produce final budget.
Make the changes to your budget in the accounting software or excel spreadsheet.
Produce a final budget report. Highlight the changes in yellow into the final budget

b) Write a memo
Your memo should outline the changes you have (or have not) made with an explanation justifying your decisions. In your justifications include the advantages and disadvantages of accepting your changes.

Your memo should discuss at least three recommendations for changes to the budget that will satisfy Betsy's requests. It is your responsibility to meet the budget so you can choose to make recommendations to increase income, decrease expenditure wherever you see fit or even negotiate not to make any changes to the expenditure.
The report memo should outline thechanges you have (or have not) made with an explanation justifying your decisions. In your justifications include the advantages and disadvantages of accepting your changes.

Assessment Task Part C

Carefully read the following scenario and complete the following activities:

Betsy has approved your budget and you need to sit down with the short order cook to discuss the budget as they do all of the ordering and are responsible for meeting the food and beverage budget requirements. Assume that one of your recommendations to Betsy was to drop the cost of food purchases without dropping the quality. The short order cook is not happy with this decision and you need to collaborate with them to come up with the alternative options.

The B&B is known for its exquisite breakfasts and currently, all food is sourced locally from individual suppliers, and where possible, organic produce. Everything is made from scratch and most items of the menu are made with fresh ingredients. The menu is as follows:
• Homemade bircher muesli with seasonal fruit compote and activated nuts.
• Baked french toast with fresh seasonal fruit and blackberry compote.
• Buttermilk pancakes with orange cardamom syrup.
• Three egg omelette with your choice of fillings - chorizo, bacon, mushrooms, spinach, feta, goat cheese, brie, blue cheese, vintage cheddar and tomatoes.
• Pumpkin and spinach quiche with rocket breakfast salad.
• Eggs benedict with your choice of ham, smoked salmon, mushrooms or bacon.
• Corn and zucchini fritters with a delectable potato rosti and breakfast salad and salsa.
• The world's best chicken and champagne breakfast.
• The big breakfast with steak, pork and fennel sausages, bacon, tomatoes, mushrooms, spinach, potato rosti and toast.
• Avocado smash with feta and oven roasted capsicum on your choice of four different breads.
• Good ole' bacon and eggs on your choice of bread.
You believe that there are several ways to reduce the costs

You will need to work with another student in the roles of manager and short order cook to discuss thefinal budget, explain what their roles are in terms of financial management (to stay within the budget, save money where possible) and come up with a list of at least four recommendations to reduce the costs.

1. Write a memo
Write a memo with your recommendations for reducing the cost of the menu. You will need to make sure that your recommendations do not have an impact on the level of customer service and the B&Bs reputation for exquisite breakfasts.

Attachment:- Managing Budgets.rar