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SITXFIN003Manage Finances Within A Budget: Futura Group SIT Version 1.0 Page 1 of 4

[1] The case study provides the budgeted and actual figures for sales revenue, food costs, beverage costs, labor costs, fixed costs, total costs, and profit for July and August. It shows variances between the budgeted and actual amounts and asks for an analysis of areas of concern. [2] Monitoring budgets is important for owners to manage finances better by identifying overspending areas for improvement, establishing cash flow patterns, and determining profit/loss. Analyzing monthly budgets against actuals allows owners to compare to original plans, take corrective actions

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1K views4 pages

SITXFIN003Manage Finances Within A Budget: Futura Group SIT Version 1.0 Page 1 of 4

[1] The case study provides the budgeted and actual figures for sales revenue, food costs, beverage costs, labor costs, fixed costs, total costs, and profit for July and August. It shows variances between the budgeted and actual amounts and asks for an analysis of areas of concern. [2] Monitoring budgets is important for owners to manage finances better by identifying overspending areas for improvement, establishing cash flow patterns, and determining profit/loss. Analyzing monthly budgets against actuals allows owners to compare to original plans, take corrective actions

Uploaded by

daniela castillo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SITXFIN003Manage finances within a budget

Task 1 – Case Study – Analysis

This task consists of 2 parts, Part A and Part B.

For Part A you are required to complete a budget analysis.

For Part B you are required to answer questions relating to the importance of monitoring and analysing budgets
and identifying methods to rectify shortfalls.

Futura Group SIT Version 1.0 Page 1 of 4


PART A

Case Study Analysis on Budget Variance

Top of the Town Hotel has asked you to calculate the variance for the following figures for the month of July and
August. Also calculate the total profit that was budgeted and actual. Analyse the findings and inform them about the
variance as they are concerned and would like to monitor the income, expenditure, profit levels, budgetary
performance of their Food and Beverage Department.

Item July August


Budget Actual Variance Budget Actual Variance
Sales Revenue 230,000 225,000 5,000 230,000 228,000 2,000
Food Costs 85,000 87,000 -2,000 85,000 86,000 -1,000
Beverage Costs 14,000 15,000 -1,000 15,000 15,000 -
Labour Costs 77,000 82,000 -5,000 78,000 82,000 -4,000
Fixed Costs 35,000 35,000 - 35,000 35,000 -
Total Costs 2,11,000 2,19,000 -8,000 2,13,000 2,18,000 -5,000
Profit 19,000 6,000 13,000 17,000 10,000 7,000

The Hotel owners and managers would like to know from you the major areas of concern where there is a deviation
that needs further monitoring and improvement.

PART B

Answer the following questions.

Questions:

1. Explain the importance to the owners of monitoring budgets and why do you think it will help them to
manage their finances better for the business.

To set up the patterns of business successfully and to establish the identity of chances of development that is so
much necessary for the owners of the business for watching over all the budgets.

In this way the owners of the business fall back to make some improvements in the areas of business having
inclination to over expenditures and over spendings.

Hence it generates the basis to produce the profit of business in relation to losses that are incurred. Budget
monitoring mainly assists to awareness of the things maintaining large pertinence in the profitable business houses
operation(Dabrowska,2016).

The budgeted amount should always meet in this approach among the things of managing the expenditure things. If
there are revenue or sales things, the company must reach above the amount of budget to experience convenient
budget variance.

If make a summary of wide views, the watch over of the budget maintains the relevance along with the
establishment of any of the very weak areas. Additionally it contributes to form the basis of business operations
and adjusting the problems that are likely to occur.

Futura Group SIT Version 1.0 Page 2 of 4


Many such decisions can be taken that are much better whether it reduce the spendings according to the sales
revenue that is earned. Monitoring budget is important to determine the cash flow, hence profit or loss. For
example, above the table of July loss $13,000.00 and August loss $7,000.00. This requires the owners to provide
funding off $13,000.00 in July and $7,000.00 in August to balance the books.

2. Explain to them the use of analysing the monthly budget and comparing the forecasted budget against the
actual budgets.
He purpose of the budgeting process is to provide a budget figure for each budgeted item. As time passes, actual

spending and revenues enter the list to compare with original budget figures.

The key difference between a budget and a forecast is that a budget lays out the plan for what a business wants
to achieve, while a forecast states its actual expectations for results, usually in a much more summarized
format.

In essence, a budget is a quantified expectation for what a business wants to achieve. Its characteristics are:

 The budget is a detailed representation of the future results, financial position , and cash flows that
management wants the business to achieve during a certain period of time.

 The budget may only be updated once a year, depending on how frequently senior management wants
to revise information.

 The budget is compared to actual results to determine variances from expected performance.

 Management takes remedial steps to bring actual results back into line with the budget.

 The budget to actual comparison can trigger changes in performance-based compensation paid to
employees .

Conversely, a forecast is an estimate of what will actually be achieved. Its characteristics are:

 The forecast is typically limited to major revenue and expense line items. There is usually no forecast
for financial position, though cash flows may be forecasted.

 The forecast is updated at regular intervals, perhaps monthly or quarterly.

 The forecast may be used for short-term operational considerations, such as adjustments to staffing,
inventory levels, and the production plan.

 There is no variance analysis that compares the forecast to actual results.

 Changes in the forecast do not impact performance-based compensation paid to employees.

Thus, the key difference between a budget and a forecast is that the budget is a plan for where a business
wants to go, while a forecast is the indication of where it is actually going .

Futura Group SIT Version 1.0 Page 3 of 4


Explain your findings and possible reasons for these variances.

The result could be greater income than originally forecast. Conversely, an unfavourable variance occurs when

revenue falls short of the budgeted amount or expenses are higher than predicted. ... If the variances are

considered material, they will be investigated to determine the cause.

3. Research and suggest what improvements do you think the owners can take to improve this situation?

Research and Suggest For the improvements do you think the owners can take to improve this situation--

 Communicate clear goals and expectations to your employees. ...


 Share information and numbers. ...
 Encourage open communication. ...
 Not communicating or communicating late can damage engagement. ...
 Actively promote organizational effectiveness, reputation, values and ethics. ...
 Culture..

Futura Group SIT Version 1.0 Page 4 of 4

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