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.

Comparative analysis report Bistro departmental budget - April . Don't forget to round your figures up or down to the nearest whole number. April Favourable / May June quarter Budget Actual Variance Variance Unfavourab le Budget Budget $ $ Revenue 14,716.8/ 105,120 x 100 Food sales 105,120 119,837 14,716.80 14.0% 114,975 328,500 Beverage sales 89,250 96,390 7,140.00 91,875 262,500 Total sales 194,370 216,226 21,857 206,850 591,000 Cost ofsales Food purchases 40,953 45,048 42,194 124,100 Beverage purchases 27,563 30,043 2,481) 9.0%) 26,775 78,750 Total cost of sales 68 516 75,091 (6,576) 68,969 202,850 Gross profit 125,855 141,135 12.1% 137,881 388,150 Expenses Advertising Prom otions 780 624 156 20.0% 962 2,600 Cleaning contractor 1,490 1,490 0.0% 1,490 4,471 Small equipment replacemen 333 393 (60) 333 1.000 Laundry 245 232 13 245.00 735 Maintenance 1,493 1,262 15.5% 1,493.33 4,480 Printing & stationery 160 195 22.0%) 160.00 480 Training & seminars 408 653 245) (60.0%) 396 1,200 Wages & on-costs 85,901 98,771 (12,870) 89,345 260,763 Utilities 3,44 3,23: 206 5.0% 3,494 10,589 Totalexpenses 94,251 106,855 13.4% 97,919 285,857 NET PROFIT 31,604 34,281 Task 3: Question and answer Answer all questions based on the budget outcomesin the completed April budget comparative report in Task 2 and case study inform ation 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. 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. Q3: Based on your responses to questions and2, what is your overall evaluation of the budget results? Is the bistro meetingits financial targets? Q4: Which expense category has the most funds allocated to it? Explain why it is important youmanage costsin this category carefully