Part B - Case Study/Practical

This section has 2 Tasks. You are required to complete both tasks. *IMPORTANT NOTE: SPREADSHEETS MUST BE PREPARED USING MICROSOFT EXCEL SCENARIO Simpsons Pty Ltd is a small take away restaurant located in Sydney CBD. The restaurant is owned by Mr & Mrs John Spice. The restaurant started its activities in January current year. In December current year the following information was collected: SALES AND COGS ACTIVITIES FOR CURRENT YEAR The restaurant sold 54,600 take away meals, and the price per meal was $10.50. The food cost per meal sold was $4.60. Also, 20,000 units of soft drinks were sold during the year. Soft drinks are sold for $2.50 and the cost price was $0.80. BUDGET FORECASTING FOR NEXT YEAR The owners estimated that for the next year the price per taking away meal could be increased to $13.00. They have also predicted that sales (in units) would be increased by 10% next year. The owners have entered into a monthly Contract with the soft drinks supplier. According to the Contract, the restaurant must purchase a minimum of 2,000 units of soft drinks per month and the cost price will be reduced to $0.50 per unit. The restaurant owners decided to reduce the selling price of soft drinks to $1.50 in order to increase sales (in units) by 50% and are expecting to meet the required selling demand. The owners have anticipated the following expenses for next year: ANTICIPATED YEARLY EXPENSES FOR NEXT YEAR\

Cost of Goods Sold (food + beverage) $291,276

Rent $ 24,000

Utilities $ 10,000

Wages $ 60,000

Miscellaneous $ 6,000

[Hint: You may firstly calculate the daily sales, and then apply the number of days to work out the monthly figures. When working out or forecasting the accounts for the cost of goods sold and expenses, you may consider using the daily method or percentage of sales method.]

Task 1 has 4 activities which require you to prepare Microsoft Excel spreadsheets based on given scenarios to monitor and review the budgets

Question 1: *IMPORTANT NOTE: SPREADSHEETS MUST BE PREPARED USING MICROSOFT EXCEL Based on the above Sales and COGS activities for the current year;

Prepare spreadsheet with annual Sales for food and drinks and COGS for meals and drinks; in addition, include columns for the monthly average and quarterly average.

Using the prepared template from Question 1; continue with the following:

Question 2: Based on the Budget forecasting for next year, as mentioned in the scenario: Prepare 2nd spreadsheet similar to Question 1 for the annual Profit and Loss Budget; also include end columns for average monthly and average quarterly totals

Question 3:

Based on the following assumptions prepare the 3rd spreadsheet with the actual trading activities for the 1st quarter next year. ASSUME THAT DURING THE 1ST QUARTER OF NEXT YEAR:

Food revenue was 20% higher than the budget forecasted

Food Cost was 30% higher than the budget forecasted

Beverage sales were 15,000 units

utility Expense was $3,000

Wages expense $20,000

Rent expense was $6,500

You are required to monitor the trading activities for Simpsons Pty Ltd for the first quarter of next year and identify and record in an additional column all dollar ($) variances from the forecasted budget.

Question 4:

In order to control costs prepare the 4th spreadsheet; identifying and recording the necessary adjustments to be made to the budget for the 2nd, 3rd and 4th quarters of next year.

Task 2

Task 2 requires you to identify options for improved budget performance.

Write a one-page financial report to the restaurant owners; include the following:

a. Based on the variances found, identify the possible causes for such deviations and incorporate your recommendations for improving the business performance.

b. Include your suggestions regarding the Contract for purchasing soft drinks.

c. Explain your reasons for the necessary adjustments made to the budget for the 2nd, 3rd and 4th quarters of next year.