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UNIT : SITXFIN004 - PREPARE AND MONITOR BUDGETS INSTRUCTION

COURSE : SIT50416 - DIPLOMA OF HOSPITALITY MANAGEMENT
Note :ALL ANSWERS ARE COMPULSARY TO SUBMIT AN ASSESSMENT

Part A – Prepare the budget for the restaurant

Scenario
John Summers and Judy Black run The Restaurant together, and have done since June 20XX.  It is now early
July 20YY and John and Judy have compiled enough information to prepare a budget for the forthcoming
year.

John and Judy understand the importance of budgeting, but are not comfortable with their knowledge to be
able to put one together. So they have come to you with the following information and attached profit and loss
statement for the previous year ending 20XX-YY in Appendix – A for assistance.

Your trainer will be acting as the stakeholder (John Summers and Judy Black) and you must verbally and
formally communicate and liaise with the stake holder through all the processes listed within the assignment
below as if you were creating this budget for a real business. 

Review the observation checklist to know what is expected of you during consultation.

Business Information

John & Judy anticipate a number of developments which will affect their business in 20YY/ZZ and which
should be reflected in the budget. These include the following:

Sales

1.    Customer numbers are expected to increase slightly.  Judy estimates that their growth will result in a
5.00% increase in sales from July 2019 which will be achieved by 3.5% increase in food sales and beverages
by 1.5%.
2.    The food and beverage sales are not constant throughout the year and fluctuate depending upon the
demand in busy periods of Christmas and Easter. The quarter sales percentage is as under:

Quarter Quarter Quarter Quarter

1 2 3 4
20% 35% 25% 20%
Cost of Goods

3.    Food costs are expected to increase by 3.25% and beverage purchase costs by 1.75%.

Expenses

4.    During the last year John and Judy hired a marketing consultant to prepare a promotional plan for the
business for the next five years. The relevant sections of the consultants recommendations for 20YY/ZZ are as
follows:

a.    The owners should allocate at least 3.5% of the sales turnover for entertainment, discounts and
giveaways. This should be split 50/50 between the two relevant cost areas (music/entertainment &
Advertising/promotion).

John and Judy have decided to scrap all the current promotional activities and implement the consultant’s
recommendations.

5.    As of 1st October 20YY, there will be a general pay rise which will increase the restaurant’s weekly wage
expense by 2.75%, and it is also estimated that employee benefits will increase by 2.25% at the same time

6.    
a.    Judy intends to keep the variable cost portion of direct operating costs,           Administration, and repairs
and maintenance in line with prior years.
 
b.    The fixed portion of the repairs and maintenance account for the last year was broken down by John as
follows:

  $
1,500.0
Fire, health and safety fees
0
1,695.1
Window cleaning contract
0
1,440.2
Carpet cleaning contract
5
2,540.2
Equipment maintenance contracts
0
5 year major overhaul on cold 1,350.0
larder 0
Major stove repairs – electrical fault 740.00
9,265.5
TOTAL
5
All of the contracts will be subjected to an increase of 4.5% (commencing on 1st July 20YY).  The fire,
health, and safety fees are not expected to change.  No major overhauls or repairs are due, however John &
Judy think it would be wise to include $2,500 in the budget to be safe.

7.    The press has reported that power and phone charges (including phone rental) are to be increased by
6.75% from 1st October 20YY.

8.    The interest expense relates to a business loan taken out on 1st July 20XX. The banks schedule shows that
the interest component for the coming year to be $8,425.

9.    The rates and insurance ledger account for last year shows the following payments:

  

  $
Rates 4,000.00
Insuranc
7,440.94
e
11,440.9
TOTAL
4
The council announced that it has increased the rates for 2019/20 by 7.75%. 
The insurance premiums are not expected to change.
 
 

Please download Appendices - Student template - SITXFIN004

Appendices - Student template - SITXFIN004.xlsx

Part A

Task 1: Prepare draft budget

Using the previous year’s financial information provided to you in the scenario, the information provided to
you by John and Judy, and the profit and loss sheet, as well as the Excel spread sheet with formulas, you are
required to collect and understand budget information and prepare draft budget. 

Refer to Appendices A - D to complete the task. 

You must submit the following items:

     A draft budget based on the information provided by John & Judy – clearly marked as DRAFT.
You must prepare the draft in the Excel Spread sheet showing:
o     Budgeted sales (food, beverage and total) for each quarter for the year ended 30th June
20ZZ.
o     Annual budget for year 20YY-ZZ including breakdown of all four quarters.
You should use the budget templates in Appendix C to prepare your budget. 

When completing this task, you must:

     Use electronic spreadsheets provided by your Assessor to prepare budget. 

     Make sure budget is divided into quarterly periods.  
     Ensure you use the previous year’s financial data and notes from John and Judy’s business
information to determine allocations for resources. 
     Prepare the budget in compliance with the statutory requirements. 
     Ensure the budget you prepare reflects the budget format used by John and Judy.
     Submit the completed budget in a single spreadsheet. 

Please upload your submissions as per the Task.

Select File to Upload

Performance Checklist and Assessment Outcome – Assessment 2, Part A, Task 1

Whilst preparing the draft budget, did the student:

Identify the key plans and objectives of the business

Develop financial estimates based on the business information provided

Allocate funds according to the priorities indicated by the owners

Verify that the budget meets the organisational goals

Prepared annual budget for year 20YY-ZZ including breakdown of all four quarters

Use the templates attached

Task 2: Negotiate budget 

Arrange a time to meet with your Assessor (who will play the role of John or Judy) to explain your draft
budget and negotiate any required changes. Please review the Role Play Observation Checklist before you
meet so you know exactly what is expected of you during the consultation. 
 

Role Play Observation Checklist and Assessment Outcome – Assessment 2, Part

A, Task 2
During the role-play, did the student demonstrate the following skills:

Thank the owner and introduce the purpose

Explain the purpose of the meeting

Clearly explain the components of the budget

Discuss the desired budget outcomes for each month in terms of: • Expected expenses • Expected revenue •
Expected profit and loss with this forecast

Negotiate on potential complex and conflicting budget requirements

Invite and coordinate the input of others in the organisation, and provide direction on budget management

Respond appropriately to all the queries presented

Use appropriate communication techniques to check if the managers are clear about the budgets
 During the role-play, did the student demonstrate the following skills:

Summarise requirements and reach an agreement to the changes proposed

Seek approval of the management.

Task 3: Finalise budget 

Make any required changes and submit your final budget – clearly marked as FINAL.

Important note:

     Where it is not otherwise stated you should assume that revenue and expenses are spread evenly
over the year.
     Any cost areas that are not mentioned can be assumed to remain in line with previous years.

Please upload your submissions as per the Task.

Select File to Upload

Performance Checklist and Assessment Outcome – Assessment 2, Part A, Task 3

Whilst finalising the budget, did the student:

Use the information based on the negotiation to revise budget

Ensure the budget was accurate and covered all elements required in the scenario

Prepare the budget in line with statutory requirements

Use the budget template provided to finalise the budget

Task 4: Disseminate budget to staff 

      Prepare a one-page report to be disseminated to all colleagues informing them of the final budget
decisions and how they impact their relevant work area. This report should contain:
o     your comments on the expected budget performance of the restaurant for the coming year
ending 30th June 20ZZ.  
o     clear identification of which items have the biggest contribution to this performance.
o     an outline of management responsibility with regards to managing the budget.

Please upload your submissions as per the Task.

Select File to Upload

Performance Checklist and Assessment Outcome – Assessment 2, Part A, Task 4

Whilst disseminating budget to staff, did the student:

Prepare a one page report to disseminate to all the staff members

Report included information on budget decisions and how they impact their relevant work area

Include details on expected budget performance of the restaurant for the coming year ending 30th June 20ZZ.

Identify the biggest contribution to the performance of the restaurant

Clearly outline management responsibility with regards to managing the budget

Organise the information in the report in a well presented manner

Result
Satisfactory Not Satisfactory
Comment

Part B: Catering and special events

Part B: Catering and special events
John Summers and Judy Black also run catering and special events as a side business. Again, a financial
statement is attached for this separate part of the business for 20XX/20YY. You need to prepare a budget for
20YY/ZZ based on the previous year’s figures and the following information below.

Your trainer will be acting as the stakeholder (John Summers or Judy Black) and you must verbally and
formally communicate and liaise with the stakeholder through all the processes listed within the assessment
below. Review the role-play observation checklist to know what is expected of you during consultation.

Task 1: Prepare budget

a.    You need to prepare 4 quarterly DRAFT budgets for each quarter of the year, taking the following
information into account:

     It is predicted that catering and special events will have an approximate increase of 4.4% in food
sales for the financial year.
     Beverage sales and costs are expected to increase by 2.35% for the financial year.
     Sales are spread evenly through all the quarters in a year.
     From 1st January 20ZZ rent on the function centre will rise by 5%.
     Wages are expected to increase by 1.25% as of July 1st 20YY
     Based on GDP it is expected food costs will rise by an average of 3% for the financial year.
     There is also a new Alcohol beverage excise that comes into effect as of the 1st June 20YY of 5%
of beverage sales.
     Due to the new carbon tax gas and electricity prices will rise by 6.25% for the financial year.
     Party hire equipment are also increasing their prices by an average of 3.25% as of the 1st January
20ZZ

Important note:

     Where it is not otherwise stated you should assume that revenue and expenses are spread evenly
over the year.
    Any cost areas that are not mentioned can be assumed to remain in line with previous years.
     Use electronic spreadsheets supplied by your Assessor to prepare budget. 
     Make sure budget is divided into quarterly periods.  
     Ensure you use the previous financial data from to determine allocations for resources. 
     Prepare the budget in compliance with statutory requirements. 
     Ensure the budget you prepare reflects the budget format used by John and Judy.
     Submit the completed budget in a single spreadsheet. 

You may use the budget templates in Appendix C to prepare your budget.

Please upload your submissions as per the Task.

Select File to Upload

Performance Checklist and Assessment Outcome – Assessment 2, Part B, Task 1

Whilst preparing the budget, did the student:

Identify the key plans and objectives of the business

Develop financial estimates based on the business information provided

Allocate funds according to the priorities indicated by the owners

Verify that the budget meets the organisational goals

 Whilst preparing the budget, did the student:

Prepared annual budget for year 20YY-ZZ including breakdown of all four quarters

Use the templates attached

Task 2: Negotiate budget 

Arrange a time to meet with your Assessor (who will play the role of John or Judy) to explain your draft
budget and negotiate any required changes. Please review the Role-play observation checklist before you meet
so you know exactly what is expected of you during the consultation. 

Role Play Observation Checklist and Assessment Outcome – Assessment 2, Part

B, Task 2

During the role-play, did the student demonstrate the following skills:

Thank the owner and introduce the purpose

Explain the purpose of the meeting

Clearly explain the components of the budget

Discuss the desired budget outcomes for each month in terms of: • Budgeted sales for each quarter •
Percentage of sales allocation

Negotiate on potential complex and conflicting budget requirements

 During the role-play, did the student demonstrate the following skills:

Invite and coordinate the input of others in the organisation, and provide direction on budget management

Respond appropriately to all the queries presented

Use appropriate communication techniques to check if the managers are clear about the budgets

Summarise requirements and reach an agreement to the changes proposed

Seek approval of the management.

Task 3: Finalise budget

Make any required changes and submit your final budget – clearly marked as FINAL.

Important note:

     Where it is not otherwise stated you should assume that revenue and expenses are spread evenly
over the year.
     Any cost areas that are not mentioned can be assumed to remain in line with previous years.

Please upload your submissions as per the Task.

Select File to Upload

Performance Checklist and Assessment Outcome – Assessment 2, Part B, Task 3

 Whilst finalising the budget, did the student:

Use the information based on the negotiation to revise budget

Analyse internal and external factors for potential impact on budget

Ensure the budget was accurate and covered all elements required in the scenario

Prepare the budget in line with statutory requirements

Use the budget template provided to finalise the budget

Task 4: Disseminate budget to staff 

     Prepare a one-page report to be disseminated to all colleagues informing them of the final budget
decisions and how they impact their relevant work area. This report should contain:
o     your comments on the expected budget performance of the catering business for the
coming year ending 30th June 20ZZ.  
o     clear identification of which items have the biggest contribution to this performance. 
o     an outline of management responsibility in regards to managing the budget.
     Submit the report to your assessor.

Please upload your submissions as per the Task.

Select File to Upload

Performance Checklist and Assessment Outcome – Assessment 2, Part B, Task 4

Whilst disseminating budget to staff, did the student:

Prepare a one page report to disseminate to all the staff members

Report included information on budget decisions and how they impact their relevant work area

Include details on expected budget performance of the restaurant for the coming year ending 30th June 20ZZ.

Identify the biggest contribution to the performance of the restaurant

Clearly outline management responsibility with regards to managing the budget

Organise the information in the report in a well presented manner

Result
 Satisfactory Not Satisfactory
Comment

Part C: Monitoring and Reviewing

Task 1: Prepare a budget monitoring plan
For the 2 budgets prepared above:

1. Identify 4 common budget deviations that might occur and develop an action plan on how to monitor
and review the budget across the next financial year using the template provided in Appendix D.
2. Identify options to adjust the budget and include details of actions to be taken in order to bring the
budget back under control.
3. Submit the completed budget monitoring action plan to your assessor.
1. You must refer to the budget monitoring policy extract provided to you in Appendix D.
2. You must use the budget monitoring action plan template provided to you in Appendix E.
3. You must make sure you include information on timelines and the persons responsible.

Appendix D – Extract of budget planning policy used by John and Judy

Procedures for Monitoring and Reviewing the Budget

The Accounts Manager is responsible for monitoring the organisation’s expenditure, reviewing the actual and
budgeted expenditures, and reporting on the progress of such expenditure.

 Financial reports will be prepared each month showing the year-to-date expenditure and
its variation from the budget estimates, and indicating any increases or decreases in
funding.
 A detailed report should be attached to management group reports detailing reasons for
variations and recommendations for corrective action should that be required.
 The Accounts Manager will indicate what effect any variations will have on the budget
projections and provide this information to the CEO.
 The Accounts Manager will also report on any other financial matters that may be
related to the Business Plan.
 Once adopted by the management group, the Amended Budget will become the new
operating budget for the remainder of that financial year.                                                    

Please upload your submissions as per the Task.

Select File to Upload

Performance Checklist and Assessment Outcome – Assessment 2, Part C, Task 1

 Did the student prepare an action plan for monitoring the budget, :

that ensures a regular review of budget to assess actual performance against estimated performance

That identifies 4 common budget deviations that might occur during the next financial year

Provides an action plan on how to monitor and review the budget across the budget cycle

Includes checks for unusual or unexpected results

Includes Checks for significant variances in the budgeted items

Includes Check for consistent results across the budgeted items

Allows analysis of internal and external factors for potential impact on budget

Allows identification of budgetary challenges allows development of different options for their resolution

Allows identification of budget deviations and deficiencies and allows development of options for meeting budg

Task 2: Monitor and review budget

Scenario
The performance of the sales budget was not as expected during the first quarter and the catering business was
able to meet 3/4ths the sales target.

The owners are a little worried about this, as the head chef of the catering division has resigned and moved to
join your competitors. The rest of the staff is finding it hard to cope with his absence. This has disturbed the
business and has led to decline in sales.

The actual performance of the business for the first quarter of the FY 20YY-ZZ was as under:

Catering and special events

Profit loss
Sep-19
statement
 Amount in
Revenue
$
Food sales  122781.45
Beverage sales 87222.00
TOTAL 210003.45
Expenditure  
Function centre rent 47000.00
Wages 92389.44
Food costs 77821.00
Beverage costs 23393.00
Business insurance 1321.00
Electricity 1176.45
Gas 1035.41
Party hire 14731.00
Laundry 1397.50
Chemicals 3113.25
TOTAL 263378.05
Profit/Loss -53374.60

1. Read the scenario which provides the details of the actual performance at the end of the first quarter
carefully and:
1. Compare the actual performance in the first quarter of FY20YY-ZZ with the quarterly budget
prepared in Assessment task 1, Part B Task 1
2. Use the Budget Variance Analysis Table Template in Appendix F to review budget for Q1 to
assess actual performance against estimated performance
3. Use the business performance information in the scenario for Q1, to complete the Comments
column for line items that vary significantly from budget
4. Identify line items that vary significantly from budget (as defined in the Budget Variance
Analysis Table template)
5. Investigate and select appropriate actions on any two significant deviations according to the
measures to bring the budget back under control – as finalised in Part C -Task 1.
2. Prepare a brief performance monitoring report which summarises:
1. at least 2 actions to make adjustments to address adverse deviations from budget
2. relevant information to in assist in future budget preparation.

Please upload your submissions as per the Task.

Select File to Upload

Performance Checklist and Assessment Outcome – Assessment 2, Part C, Task 2

Did the student prepare a performance monitoring action plan and report that:

Review Year (Y) Q1 performance information

Identify two-line items that vary significantly from budget

Analyse the significant variances by using the business performance information for Q1 in the comments colum

Include two options for meeting budgetary requirements

 Did the student prepare a performance monitoring action plan and report that:

Analyses internal and external factors for potential impact on budget

Identifies budgetary challenges and develop different options for their resolution

Identifies budget deviations and deficiencies and includes options for meeting budgetary requirements

includes relevant information and suggestions to assist in future budget preparation

Result
Satisfactory Not Satisfactory
Comment

I acknowledge that I understand the requirements to complete the assessment tasks. The assessment
process including the provisions for re-submitting and academic appeals were explained to me and I
understand these processes. I understand the consequences of plagiarism and confirm that this is my
own work and I have acknowledged or referenced all sources of information I have used for the purpose
of this assessment

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