ASSESSMENT COVER SHEET

Course Code and Title: SIT50422 Diploma of Hospitality Management

Student Name:Krinakshi Student ID:

Unit Code &Title: SITXFIN010 Prepare and monitor budgets

Assessment Task Number: 2 Week Due:

Extension approved: Yes No Trainer’s Name:

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Course: SIT50422 Diploma of Hospitality Management

Unit Code and Name: SITXFIN010 Prepare and monitor budgets
Assessment item: 2 Short answer questions/Case-scenario practical
questions
Due date: Week 4 (Extension requires prior approval
from your assessor)
Trainer/Assessor: TBC

Context and Purpose of the assessment:

This assessment will assess your skills and knowledge in the area of identifying strategic
change needs in relation to ‘SITXFIN010 Prepare and monitor budgets’ unit of
competence. The following table maps the assessment activity against elements and
performance criteria of the Unit:

Questions
Performance Criteria

(All questions)
1.1. Determine and confirm scope and nature of required budgets.
1.2. Identify, access and interpret data and data sources required for budget preparation.
1.3. Analyse internal and external factors for potential impact on budget.
1.4. Provide opportunities for colleagues to contribute to budget planning process.
2.1. Draft budget based on analysis of all available information.
2.2. Estimate income and expenditure and support with valid, reliable and relevant information.
2.3. Reflect organisational objectives within draft budget.
2.4. Assess and present options and recommendations in a clear format.
2.5. Circulate draft budget to colleagues and managers for input.
3.1. Negotiate budget according to organisational policies and procedures.
3.2. Agree on and incorporate modifications.
3.3. Complete final budget in a clear format within designated timelines.
3.4. Inform colleagues of final budget decisions and application within relevant work area, including reporting
and financial management responsibilities.
4.1. Regularly review budget to assess actual performance against estimated performance and prepare
accurate financial reports.
4.2. Incorporate all financial commitments into budget and budget reports.
4.3. Investigate and take appropriate action on significant deviations.
4.4. Analyse changes in internal and external environment and make necessary adjustments.
4.5. Collect and record relevant information to assist in future budget preparation.
 • The student must have access to a Computer, Printer and Microsoft
Office Suite Applications (2003 or 2007) for doing the assessment for this unit.

• If you are not sure about any aspect of this assessment, please ask
for clarification from your assessor.

• If the assessment is not satisfactory, the trainer will allow one more
attempt to the assessment item.

• The responses to assessment questions should be in your own words

and examples from workplace should be used wherever possible.

Part A: Short answer questions: Answer the following questions

• Define a budget. What are the benefits of budgeting?

-A budget is a spending plan based on income and expenses.The benefits of
budgeting provides target for growth,2-Improved focus based on facts,3-Manage cash
flow,4-Monitor performance and progress.

• Outline the budgeting process in your organization.

-A budget plan is a chart that shows you the flow of money in your everyday life.
A budget can help you determine where you are overspending as well as help you adjust bad
spending habits.

• Are there any limitations of budgeting? How can you overcome these
shortcomings?
-A limitations of budgeting is that they can hide inefficiences if based solely on
percedent rather than on periodic evaluation of circumstances and standards.Another way
to limit budgeting disadvantages is clear policies on spending.

• Who are the key stakeholders for an organization? How their

information needs is served by budget and forecasts?
- The key stakeholders for an organization are investors,employees,customer and
suppliers.

• What is ‘financial forecasting’? How do you collect, analyze and use

data for forecasting budgeted estimates?
-Financial forecasting is predicting a company’s financial future by examining
historical performance data such as revenue ,cashflow,expenses or sales.Data analytics
helps finance teams gather the information needed to gain a cleat view to key
performance indicators.

• Explain the concept of “Management by Exception”. How does this

help in controlling the activities of the organization.
-Management by exception means looking at the financial and operations result of
any business enterprise. The aim is to point out the significant differences between the
expected and budgeted amounts. It happens when the
 company controller alerts the management of expenses that are beyond the desired
amounts.Management by exception allows managers to lead their company efficiently by
delegating tasks. Managers focus on achieving the
company's vision while other employees work on daily tasks to keep the company
operational. This allows all company employees to stay productive and specialize in certain
tasks.

• What do you mean by budget milestones and performance indicators?

-The Budget Milestones report reconciles complicated budget data and conveys it in
easily-understood graphs, tables and charts. Budget Key Performance Indicator (KPI)
reports are considered management dashboards and are
used by executives and budget managers to ensure that the annual budget is
aligned with the strategic goals of the organization.

• What do you understand by ‘Behavioral aspects of budgeting’?

Explain the different approaches and the positive/negative consequences relating to
factors like stress, motivation, commitment and responsibility and attitudes of the
employees and the overall performance of the organization.
-Budgets can bring positive behaviour among the people when the goals of
individual managers are found in conformity with the goals of the
organisation.Generally, workers with good attitudes have stronger performance,
and workers with poor attitudes exhibit less-than-superior performance. It is up
to managers to monitor employee attitudes and address attitude problems such as negativity
and laziness.

• What are the two common budget forecasting techniques? Briefly discuss
zero- based budget forecasting techniques.
-There are two common budget forecasting techniques -1:QUANATITATIVE
2:QUALITATIVE.ZBB is a cost discipline enabling businesses to improve resource planning,
employee engagement, and organizational collaboration. Although ZBB is often
credited with measures to reduce costs, its approach doesn’t exclusively focus on
savings and can help test assumptions, solve problems, and ensure spending is aligned to the
growth objectives of the organization. If performance does
not meet expectations, ZBB can empower businesses to identify how to best course-
correct for the months ahead.

• What do you mean by budget assumptions and parameters? How they

can be used by managers in controlling the budget?
-Budget assumptions are expectations -- usually expected or presumed income and
expenses. Making reasonable assumptions when creating a budget for the first time gives
you starting numbers to work with for planning purposes.
BUDGET PARAMETERS means for each Component ten (10) percent above or below
the estimated cost for such Component in the Budget therefor provided that the aggregate of
the actual costs of all Components for any Item of
Equipment shall not exceed the aggregate of the estimated costs of all Components.

• Explain the differences between static, flexible and rolling budgets.

Static vs. Flexible Budgets vs Rolling Budgets.
• Static budget :-
• Prepared for one level of sales volume
Does not change after developed
• Flexible budget:-
• Prepared for several different volume levels within a relevant range
• Separates fixed and variable cost
• Rolling budget:-
• Add a new budget period at the end of the most recent period.

Part B: Case scenario/practical questions:

Case study
• The personnel department of Macy’s clothing division had the
following budget for the year 2015 (12 months period):
$
Salaries and wages 242,550
Office stationery 5,439
Telephone 10,080
Electricity 11,751
Office rent 27,000
Depreciation 9,150
305,970

Assume the budget for December for the personnel department was 9% of the year’s total
budget for salaries; 7.5% for stationery, telephone and electricity; and one-twelfth for office
rent and depreciation. Actual results for December were:
$
Salaries and wages 22,650
Stationery 384
Telephone 717
Electricity 854
Office rent 2,325
Depreciation 762
27,692
Required:
• Prepare a performance report for December. Calculations may be
made to the nearest dollar (Use Microsoft Excel for calculations)
• Primal Holdings policy is to investigate all variances that deviate by
plus or minus 5% from budget. Identify items to be investigated.
• Imagine you are the Manager of the Personnel department, present a
Performance report to the senior management commenting on the reasons for
these variances and recommend the possible corrective actions to be taken.

Case study

• Hero Cycles Ltd manufactures mountain bikes for the Australian

market and sales for year ended 30 June 2013 were $550,000. Hero Cycle is
considering a substantial investment in cycle building equipment and for this it has
hired the services of a market research consultancy firm to report on likely sales for
the next two years. The market research showed:
• Hero Cycles had 30% of the national market at 30 June 2013.
 • The national market is expected to grow at a compound rate of 10%
per annum over the next two years.
• An effective marketing campaign could see Hero Cycles Ltd. Increase
their market share to 32% in 2013-14 and 35% in 2014-15.

Consider you are the manager of “Best services market research Pty Ltd.” Hero
Cycle Ltd has hired your services to prepare the following reports.
• Estimate Hero Cycles Ltd sales for the years ended 30 June 2014 and
30 June 2015 if the company implements the marketing campaign.
• And present a feasibility report relating to the proposal of investing in
the cycle business equipment.

**************End of the Assessment 1**************