Prepare and Monitor Budget PDF

ASSESSMENT TOOL
Qualification: SIT50416 Diploma of Hospitality Management

Cluster number and name: CCHD_1.2_Prepare and monitor budgets
Units of competency: SITXFIN004 Prepare and monitor budgets
Student’s ID: Amar Nath Upadhyay 44030
Assessor’s name: Daniel Sussman
Students – please ensure that you read the assessment instructions prior to completing
the assessment tasks and ensure that you are ready to be assessed. you must also
complete the student declaration to acknowledge that the submitted tasks are authentic
and completed independently
ASSESSMENT TASK 1: KNOWLEDGE QUESTIONS

Assessment type:
 Written Questions
Assessment task description:

 This is the first assessment task where students are required to demonstrate their
knowledge of being able to prepare and monitor budgets.
 Student must answer all questions to the required level, e.g. provide the number of points,
to be deemed satisfactory in this task.
 Trainer/Assessor is required to provide feedback within two weeks and notify student when
results are available.
Applicable conditions:
 All knowledge tests are untimed and are conducted as an open book assessment (this
means students can refer to textbooks or the internet to conduct research during the
assessment). However, the answers must be in the student’s own words to demonstrate
their own understanding of each individual question.
 Student must read and respond to all questions.
 Student must type the answer to the questions and must complete their work
independently.
 No marks or grades are allocated for this assessment task. The outcome of the task will be
Satisfactory or Not Satisfactory.
 The trainer/assessor may ask student relevant questions on this assessment task to ensure
that this is his/her own work.
 Where a student’s answers are deemed not satisfactory after the first attempt, a
resubmission attempt will be allowed.
 Student may speak to their Trainer/Assessor if the student has any difficulty in completing
this task and requires reasonable adjustments.
Purpose of the assessment

The purpose of this assessment task is to ensure that students have the knowledge to:
 Identify different types of budget
 Identify budget terminology
 Identify specific industry sector and organisation in terms of
o role and nature of budgets
o budget formats, budget performance and financial reports
o financial reporting procedures and cycles
HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

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o features and functions of accounting software programs used to prepare and monitor
budgets
 internal and external factors that impact on budget development
 budget preparation and monitoring practices and techniques:
 sources and contents of data required for budget preparation:
 techniques for making budget estimates
 common reasons for deviations and budget deviation management.
Assessment Conditions
Skills must be demonstrated in an operational tourism, travel, hospitality or events business
operation or activity for which budgets are prepared. This can be:
 an industry workplace
 a simulated industry environment.
Assessment must ensure access to:
 computers, printers and accounting software packages
 financial and operational data and reports used to prepare budgets
 others with whom the individual can discuss, and negotiate draft and final budget
components; these can be:
 those in an industry workplace who are assisted by the individual during the
assessment process; or
 individuals who participate in role plays or simulated activities, set up for the
purpose of assessment, in a simulated industry environment operated within a
training organisation.
Benchmark for Assessment

You are expected to respond to all aspects of each question. In some cases, direction is provided
on the expected length of your response. Some questions will require a Short, Medium or Long
response. The following is a guide to the expected number of words for each of these categories
unless otherwise indicated.
Short 30+ words
Medium 100+ words
Long 200+ words
Questions:
Read all questions below in class with your colleagues and provide answers to each question
below.
1.1. List five (5) financial records and briefly explain the purpose of each one.
Financial Records Purpose
1 Cash book records The cash book is used to record receipts and payments of
cash. It works as a book of original entry as well as a ledger
account. The entries related to receipt and payment of cash

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are first recorded in the cash book and then posted to the
relevant ledger accounts.
2 Business activity The main purpose of this is to record the business activities
statement records which include GST, Fringe benefits tax, wine equalization tax
to be submitted to the ATO for their tax obligation
3 Banking records The purpose of the banking records is to record incoming and
outgoing financial transaction.
4 Records of income it will enable the control of cash in the business. Provide
and expenses trading concern and used to prepare the profit and loss
account.
5 Records of Fair work Act requires an employer to make and keep certain
payments relating employee records relating to remuneration, hours of work
to employees and leave entitlements for seven years. Current and former
employees have the right to access their own records.
1.2. Discuss with your group the following types of budges and briefly explain each one.
(Guide: Medium to Long)
A cash flow budget is an estimation of the cash inflows and

outflows for a business over a specific period of time. This
Cash budget/ cash flow
budget is used to assess whether the entity has sufficient cash
budget
to operate. Companies use sales and production forecasts to
create a cash budget, along with assumptions about necessary
spending and accounts receivable.
Wage budget A wage budget is the amount of estimated money spent on an

employee in exchange for work needed to be done. It is the
cost incurred by companies to pay hourly employees. Wage
budget may vary depending on the number of hours worked
by employee.
Departmental budgets The departmental budgets refer to the money departments

spend each allocated time frame on things for the
departments. For example housekeeping department, F&B

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department.
Event budgets Event budget is a forecast of the income and expenditure of an

event arise. The purpose of an event budget is to provide
guidance for the structure and planning of an event, with
particular emphasis on the financial viability of events. Event
budgets are useful as an accurate (as possible) guide to the
outcome of your event, whether it will make a profit, loss or
break even.
Project budgets It is the projected cost needed to complete a particular project

over the define period of time. This budget will estimate what
the costs of project will be for the every phase of the project.
Purchasing budget Purchasing budget is a forecast of quantity and value of

materials required to purchase during the budget period.
Sales budgets Sales budget is a crucial part of an overall small business

budget. It is management’s estimate of sales for a future
financial period. It contains the information about the sales of
product/ services and also the timing and amount of sales. Etc.
Whole organisation budgets This is budget forecast for whole organizational income and
expense.
Master budget The master budget is the aggregation of all lower-level

budgets produced by a company's various functional areas,
and also includes budgeted financial statements, a cash
forecast, and a financing plan.
1.3. Explain the following accounting terminologies used in budgeting.

Fixed cost fixed costs are defined as expenses that do not change as a function of the activity of
a business, within the relevant period. These are the overheads of the business
expenses that are not dependent on the level of goods or services produced by the
business.

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Variable cost Variable costs are defined as the expenses that changes when the product or service
produced by a company changes.
Direct cost Direct cost is an expense that can be identified with a specific cost such as labor,
material, fuel, or power. In other words A direct cost is a price that can be completely
attributed to the production of specific goods or services.
Indirect cost or An indirect cost is a cost that is not directly traceable to a cost object. Rather, the cost
overhead is common to several objects and requires an allocation. For example, depreciation
etc.
 Depreciat Depreciation is an accounting method of allocating the cost of a tangible asset over
ion its useful life and is used to account for declines in value. Businesses depreciate
long-term assets for both tax and accounting purposes
1.4. Many factors need to be taken into consideration when preparing financial and statistical
reports. Tick all those that apply from the list below:
 cash flow
 commercial account activity
 commission earnings
 daily, weekly and monthly transactions
 expenditure and income
 price of milk and bread
 performance of department, project and/or products and services
 sales performance
 cost of petrol
 staff costs
 dollar value of stock levels and wastage
 variance in income and/or expenditure
 number of people coming to the staff Christmas party
 yield
1.5. List 2 financial reporting cycles relevant to the travel, tourism and hospitality sector?
(Guide: Short)
The reporting cycle involves the running, managing, updating, and reporting of a company’s

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accounts. The cycle usually runs concurrently with the planning and budgeting cycles. The
reporting cycle period can be a year, fiscal quarter, or a specified period. The end
of the year Taxation, superannuation / Business activity statement are the relevant to the
travel, tourism and hospitality sector.
1.6. Discuss with your group and explain one technique you could use to maximise the
performance of budgets.
(Guide: Medium)
Managing budgets requires the businesses to constantly monitor, control, and record income
and expenditures to keep track of every financial movement and its outcome.
1 monitoring income and expenditure: budget monitoring is done to make sure that
resources are being utilised as per plans on the budget. Income and expenditures need to be
monitored to find any change in patterns so that appropriate actions can be taken.
2.to control income and expenditure: is the next important issue. Without this organisation
will be spending money out of track. The amount of finances available for a particular year
should reflect the total expenses planned for that particular year.
3. recording income and expenditure: All the accounts related to income and expenditure,
any income that is due in, any payments that were received, receipts and invoices issued,
debts etc., need to be recorded clearly with date and purpose. Recording income is a way of
determining whether the business is making profit or not, because it includes details of
money received and spent
1.7. List two (2) accounting software program you could use in a business and list some its
features.
(Guide: ;Short)
Xero :
Xero was created for business users, not accountants. However, they have now created a massive
ecosystem of accountants who can work directly with business owners to assist them. features
includes : A clear financial overview, Access from anywhere anytime, Easy creating and tracking of
invoices etc.
Reckon one:
Reckon One is the cloud accounting software service delivered by established industry veteran Reckon.
The software looks good, is easy to use and the dashboard will appear when the we first connect to
company file puts important information front and center. The features include : Easy payroll, invoice
and billing, Bank reconciliation, track time etc.

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1.8. Explain what cash flow budgets are used for and why cash flow budgets are important for
the businesses?
A cash budget is very important, especially for smaller companies. It allows a company to
establish the amount of credit that it can extend to customers without having problems with
liquidity. A cash budget helps avoid a shortage of cash during periods in which a company
encounters a high number of expenses.
1.9. Research the following and explain each one in your own words:
(Guide: Medium).
a. Budget
b. Financial report
c. Statistical report
A) Budget: It is a financial plan for a defined period, often one year. It includes planned sales
volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash
flows. A business will have a budgetary goal that is what it wants to achieve in terms of a
financial outcome for the period in question.
B) Financial report: are the formal records of the financial activities and position of a business
which includes a balance sheet through which the business will able to find out its assets,
liabilities, and owners equity at a given year or point of time.
C) Statistical report: the statistical report will provide a descriptive information and
description of numerical data that presented in a statistical table. This report involves stating
the trends and patterns observed in the table as well as indicates when the numbers do not
necessarily fall within the general patterns
1.10. Many internal and external factors could impact on budget development.
(Guide: Tick all those below that apply)

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 growth or decline in economic conditions

 human resource requirements
 new legislation or regulation
 unexpected loss of electricity
 organisational and management restructures
 organisational objectives
 staff taking too much sick leave
 shift in market trends
 public holidays and sporting events such as Melbourne Cup
 significant price movement for certain commodities
 supplier availability and their charges
1.11. When preparing budgets there are many sources and contents of data required.
(Guide: Tick all those below that apply)
 competitor, customer and supplier research
 footie tipping data
 declared commitments in areas of operation
 financial information from suppliers
 financial proposals from key stakeholders
 income and expenditure for previous time periods
 social club balance
 departmental, event or project budgets
 staff Christmas party survey
 grant funding guidelines or limitations
 management policies and procedures
 organisational budget preparation guidelines
 performance information from previous periods
 Staff performance review data
1.12. List four (4) techniques for making budget estimates and briefly explain each one.
(Guide: Medium)
Financial Records Purpose
1 Analogous Analogous estimating uses the actual data from a previous as

estimating the basis for estimating the current.
2 Parametric Parametric is more accurate, specifically when the underlying

estimating data is scalable. Parametric uses a relationship between
variables (a unit cost/duration and the number of units) to
develop the estimate.

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3 Three point Three-point estimating produce three estimates based on

estimating previous data or scenario. Which are: - the best-case estimate.
The most likely estimate, and final worst case estimate.
4 Bottom up Bottom up estimating is the most accurate and time-consuming

estimating of all estimation methods in which every single activity is
broken down into details at the bottom level and aggregate the
estimations of each individual component to give an overall
estimation.
1.13. List five (5) common causes of budget deviations and how this can be managed?
(Guide: Short to Medium)
1. Underfinancing: one of the main reasons that cause budget deviation is not allocating
an adequate amount of budget at the start. Solution: - additional funding or
scope reduction.
2. Lack of resource planning: if failed to effectively plan the resources that are available
to the business, then this would obviously lead to a budget deviation. Solution: -
this can be avoided by proper planning, plan the scope, then estimate the
cost, and time it would require then accordingly, allocating resource and
budget.
3. The cost of material: - The cost of materials is the other major factor in the budget
variance. The company budgets for a certain price of raw materials that it expects to
use to make each product. Solution: finding the supplier who provide quality
product at reasonable price.
4. Labour costs: - cost of labour may affect the budget either in positive way or in
negative way.eg. overstaffing will rise the cost and deviate the budget. Solution: -
appropriate hiring and allocation of staff accordingly.

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5. Unpredicted cost: Many a budget has been blown up by an unexpected expense for
example broken machinery or oven.
Solutions are: 1. Right person at right time. With multi-tasking skill.
2. comparing the supplier price and choosing the cheap supplier.
3. keeping aside certain amount of money on the budget for the unpredicted cost.
Feedback:
Task outcome: q Satisfactory q Not Satisfactory
ASSESSMENT TASK 2: MANAGE FINANCES WITHIN A BUDGET

AND PREPARE AND MONITOR BUDGETS
Assessment type:
 Case study, meeting and practical activities

 This is the second assessment task where students are required to participate in a role-play
and presentation activity,
 Student must complete all activities at the required level, e.g. provide the number of
points, to be deemed satisfactory in this task.
 Trainer/Assessor is required to provide feedback within two weeks and notify student when
results are available.
 The role play and presentation will be timed and you will be allocated approximately 10 to
15 minutes. You must consult your assessor prior to the presentation to ensure that the
work is your own and authentic.
independently.

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 Evidence of the ability to complete tasks outlined in elements and performance criteria of
this unit in the context of the job role, and:
 prepare a budget for a business that meets the specific business’ needs
 demonstrate the following when preparing the above budget:
 consultation on components
 analysis of factors that impact on the budget
 completion of draft and final versions of budget within designated timelines
 monitor and review the above budget against performance over its life cycle.

Short 30+ words
Medium 100+ words
Long 200+ words
2.1. Case study

Read the case study and complete as indicated by guides provided.

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You own a small travel services business.

It is the middle of Month 2 of your financial year and your accountant has just given you the
results for Month 1 and the latest sales forecast for Month 3 (next month).
Month 1 Month1 Month 2 Month 3

Months vs.
Profit/Loss
Budget Actual Budget Budget
Sales $50,000 $45,000 $50,000 $37,500
Purchases 22,000 20,000 22,000
Advertising 500 2,000 500
Cleaning costs 500 500 500
Office supplies 2,000 1,750 2,000
Repairs & 1,000 3,000 1,000

Maintenance
Telephone and 1,500 1,000 1,500

postage
Wages & on-costs 10,000 10,000 10,000
Profit (or Loss) $12,500 $6,750 $12,500
a. Refer to the table on the above, identify and report the deviations (favourable or
unfavourable variances) for actual to budget for month 1?
(Guide: Short)
Month 1 Month1 Favorable or

Months vs.
unfavorable
Profit/Loss variance
Budget Actual
Sales $50,000 $45,000 -5000 unfavorable
Purchases 22,000 20,000 -2000 Favorable
Advertising 500 2,000 1500 Unfavorable

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Cleaning costs 500 500 0 Favorable
Office supplies 2,000 1,750 -250 Favorable
Repairs & 1,000 3,000 2000 Unfavorable

Maintenance
Telephone and 1,500 1,000 500 Favorable

postage
Wages & on-costs 10,000 10,000 0 Favorable
Profit (or Loss) $12,500 $6,750 -5750 Unfavorable
b. In what areas do you feel corrective action may be required? Please provide one example
of corrective action for each identified area!
The area which require a corrective action are

Sales : sales is 5000 lower than the projected budget and the variance is unfavourable. The
corrective measures are boosting the sales and upselling are required.
Advertising: has exceeded 1500 higher (unfavourable variance) than the projected budget.
The corrective measures may include advertising in low cost media like for example social
media and other modes of advertisement.
Repair and maintenance: has exceeded 2000 higher (unfavourable variance) than the
budget. The corrective action should include the regular servicing of the machinery and
equipment.
Profit and loss: the overall profit is 5750 less (unfavourable variance) than the forecast
budget. The measure can be taken to make this into favourable by increasing sales and
reducing overheads costs.
c. Your number one priority is to maintain a sufficient profit in your business. Given the
reviewed sales forecast for Month 3, plan the reallocation of funds for Month 3 if you still
wish to achieve the same profit as in Month 2.
Please explain how would you decide which areas to reallocate?
(Guide: Medium)
Months vs. Month 1 Month1 Month 2 Month 3

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Profit/Loss Budget Actual Budget Budget
Sales $50,000 $45,000 $50,000 $37,500
Purchases 22,000 20,000 22,000 12,400
Advertising 500 2,000 500 200
Cleaning costs 500 500 500 500
Office supplies 2,000 1,750 2,000 200
Repairs & 1,000 3,000 1,000 1500

Maintenance
Telephone and 1,500 1,000 1,500 200

postage
Wages & on-costs 10,000 10,000 10,000 10,000
Profit (or Loss) $12,500 $6,750 $12,500 $12,500

 Purchases: taking the consideration of the sales budget it is reasonable to budget 12400
for purchasing in order to achieve the desirable profit margin.
 Advertising: The budget for advertising has to be modify and bring it down to 200 due to
the fact that there are cheaper ways to advertise like social media and other.
Furthermore, another reason is that although, the spending was high on the previous
months we hardly make profit.
 Cleaning cost: it is one of our fixed cost
 Office supply: budget for office supply is adjusted to 200 to meet the desirable profit
target.
 Repair and maintenance: the budget for repair and maintenance has been increased to
make sure the machinery are being serviced and repair in timely manner to get the most
out of it.
 Telephone and postage: the budget has been reduced to 200 for this particular items due
to the fact we are focusing on using social media and email to communicate with
customer and suppliers.
 Wage and on costs: it has remained unchanged since these are fixed cost
d. You have decided to organize a meeting with your colleague (your assessor) to discuss
changes to income and expenses prior the implementation.
You must address the following points.
 Advise the staff and colleagues of the budget status in relation to the targets
 Identify potential reasons for the deviations

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 Explain the options for effective management of the deviations

 Inform them about your decision regards to resource allocation
 Promote the importance of budget control and monitoring
 Discuss the strategies, control systems and records used to monitor the budget
 What strategies could you implement to monitor resource usage throughout Month
3?
 How would you involve the staff in the budget planning, implementation and review
process?
 How would you keep the staff informed of any changes to the allocation of resources?
 What is the importance of the budget control?
Your assessor will provide you with feedback prior to you completing your presentation.
Meeting Minutes
Day and date: 6/7/2020 Time: 10:55 AM

Chair: Daniel Sussman Secretary:
Team of other Amar, Sunny, Soujan, Himanshu
students / colleagues
who were present at
the meeting:
Topics discussed: Content covered and discussions and ideas generated during the meetings and how they will be
implemented in the budget development
(please insert issues to
be covered during the
meeting)
Advise the staff and
colleagues of the Staff and colleagues are advised regarding the budget status of month 3 in which we
budget status in have allocated sales budget $37,500 and we want to achieve the profit margin of
relation to the $12,500. In order to achieve the target we have distributed and changed the budget
targets for purchase (12,600), advertising, office supplies and telephone (200), repair and
maintenance is 1500. Whereas the budget for wages and cleaning costs are remained
unchanged.
Identify potential
reasons for the
There were quite a few deviations in the budget. Some of the deviation were seen in
deviations advertising, repair and maintenance. Advertising through TV campaign didn’t work.
On the other hand, it was expensive as well. Also, the machine broke down suddenly
and created a deviation in the budget allocated for repair and maintenance.
Explain the options
for effective
Some areas in the budget we are spending a more that the allocation. The negative
management of the deviation can be avoided by proper planning, estimation of the cost and allocating
deviations resources. For example finding a cheaper option (social media/ leafletting) for

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advertisement and having a scheduled maintenance instead of calling them this way
we can manage the deviation effectively.
Inform them about

your decision
The staff can be informed in various ways. The most effective and convenient way
regards to resource could be Email. The company can also hold a meeting in order to inform staff about
allocation the decisions regarding resource allocation.
Promote the The budget is a forecast of income and expense, it acts as road map for the
importance of
budget control and business and also the success and failure is depending on the effectiveness of the
monitoring budget it consists cash budgets, departmental budget, wages budgets, event
budgets, sales/revenue budgets, so on. Since the budget contains everything it will
definitely require to explain and promote to the staff.
Discuss the Managing budgets requires the businesses to constantly monitor, control, and record
strategies, control
systems and income and expenditures to keep track of every financial movement and its outcome.
records used to 1 monitoring income and expenditure: budget monitoring is done to make sure that
monitor the budget
resources are being utilised as per plans on the budget. Income and expenditures need
to be monitored to find any change in patterns so that appropriate actions can be taken.
2 Recording income and expenditure: All the accounts related to income and
expenditure, any income that is due in, any payments that were received, receipts and
invoices issued, debts etc., need to be recorded clearly with date and purpose.
Recording income is a way of determining whether the business is making profit or not,
because it includes details of money received and spent.
What strategies
could you
The effective strategy we can use by implementing and monitoring the income and
implement to expenses as well as the occurring deviation from the first and second month as a
monitor resource reference and compare those with the third month. This will allow us to identify
usage throughout whether the budgeting planning is effective or if not then, there is the need for change
Month 3?
in budget.
How would you
involve the staff in
The staff plays vital role in planning, implementing and review process of budget. For
the budget planning, instance, a chef in a hotel has clear idea about which product is sold the most and
implementation, and which isn’t. Involving him into planning the budget will aid in estimating the realistic
review process? budget. Also, the cashier in a groceries store knows how many customers comes and
what most of them look for. By involving staff, the company can allocate the budget
more realistically.

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How would you

keep the staff
In my opinion, the best and fastest way to inform staff about the changes is by using
informed of any email. Email is faster and convenient. I can also hold a meeting and inform the staff
changes to the about the changes to the allocation of the resources.
allocation of
resources?
What is the Budgeting is the most basic and the most effective tool for managing the money.
importance of the There are many benefits for the business to create and follow budget.
budget control?
1. It gives control over the money.
2. Keeps the business focused on their money goals.
3. It lets the business to avoid spending unnecessarily on items and services that
do not contribute to attaining financial goals
Assessor checked the document and approved it to be forwarded to all Meeting minutes distributed to team
team members: Yes / No members Yes / No
e. Presentation (10 – 15 minutes)

After you have been given feedback from your assessor you are required to prepare a
PowerPoint presentation.
Your assessor will review and provide you with feedback on your presentation and advise
you of a date and time to delivery your presentation to your group (your colleagues).
(Guide: 8-10 slides)
https://web.microsoftstream.com/video/9d541363-2df1-4472-90a3-cea2969aa618
2.2. Case Study

You are the Accountant for a small retail business and have been asked by management to
review and examine the following financial report for the month of July and complete the
questions asked
Line Item Budget $ Actual $

1

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1 Sales 45000 40000
2 Cost of Goods Sold 22500 20500
3 Gross Profit 22500 19500
4 Expenses
5 Wages 14000 14700
6 Packaging 400 350
7 Cleaning 350 300
8 Advertising 2500 2700
9 Rent - premises 2600 2850
10 Telephone 400 430
11 Total Expenses 20250 21330
12 Net Profit 2250 (1830)
a. Complete the chart below by identifying variances and listing each variance as:
 favorable (F) or
 unfavorable (U).
(Guide: Include any comments you may have to explain the variances)
Line Variance Comments

No.
Type $ F/U
1 Sales -5000 UF Actual Sales shows unfavorable variance

of $5000
2 Cost of Goods Sold -2000 F COGS shows Favorable variance of $2000
3 Gross Profit -3000 UF The gross profit is $3000 less than

projected
4 Wages 700 UF Unfavorable variance $ 700 due spending

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higher on wages.
5 Packaging -50 F Favorable variance $50 spent less on

packaging
6 Cleaning -50 F Favorable variance $50 spent less on

cleaning
7 Advertising 200 UF Unfavorable variance of $200 spent more

on advertising.
8 Rent - premises 250 UF Unfavorable variance of $ 250 spent more

on rent and premises.
9 Telephone 30 UF Expenditure is $30 higher than the

budget.
10 Net profit -420 UF Unfavorable variance of $420 is in loss.
b. Refer to the variance report above and explain any corrective actions that you believe
needs to be taken regarding the deviations!
(Guide: Short).
In order for us to not deviate from the budget we could take the corrective measure in the
following areas as well as following and monitoring budget closely.
Sales
Gross profit
Wages
Advertising
Rent
Telephone
Net profit
c. The appropriate staff should be informed of the deviation; how would you inform them?
(Guide: Short).
Staff and the appropriate department can be informed either by email or in team
meeting/briefing.

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2.3. Case Study

As a manager of an event management company, you are required to complete a cash flow
forecast using the template provided. Your cash flow forecast will predict the bank balance at
the end of each month for every month of the year. The information you have at your
disposal to complete this task is as follows:
 The event management company has on its books four (4) major events to run which
will take place in March, May, August, and October.
 The total of $285,000 of ticket sales will be earned in the months that the events are
held. The March event will earn $65,000, and the other events in May, August and
October will earn $70,000, 85,000 and $65,000 respectively.
 Expenditure on casual salaries, travel and transport, and venue hire will occur only in
the months in which the four events take place. These expenditures will be the same
for each event.
 Salaries and Office and administration expenses will occur evenly every month.
 The company's opening bank balance on 1 January is $5,000
 The company will receive a government grant of $50,000 in July.
 The company will make a small income from Merchandising during the months in
which the four events are staged. The event in March will earn $1,300 merchandising
income, and the other events in May, August and October will earn $1,600, $1,800
and $1,300 respectively.
a) You are required to prepare a cash flow budget. Read the instructions and using the
template provided complete the cash flow budget.
Budgeting Exercise - Cash flow forecast template
# Total Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Opening 5,000 5,000 -8000 - 9,800 -3,200 32,90 19,900 56,90 108,2 95,20 126,0 113,0
Balance 21,00 0 0 00 0 00 00
0
Income
Ticket 285,0 65,00 70,00 85,00 65,00

Sales 00 0 0 0 0
Merchan 1,300 1,600 1,800 1,300

dising
6,000

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Govern 50,00
ment 0
Grant 50,00
0
Total 391,0 0 0 66,30 0 71,60 0 50,000 86,80 0 66,30 0 0

00 0 0 0 0
Expendit
ure
Salaries 120,0 10,00 10,00 10,00 10,00 10,00 10,00 10,000 10,00 10,00 10,00 10,00 10,00
00 0 0 0 0 0 0 0 0 0 0 0
Casual 2,500 2,500 2,500 2,500

wages
10,00
0
Office & 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Admin
Expense 36,00
s 0
Travel & 14,00 14,00 14,00 14,00

Transpor 0 0 0 0
t 56,00
0
Venue 6,000 6,000 6,000 6,000

Hire
24,00
0
Total 246,0 13,00 13,00 35,50 13,00 35,50 13,00 13,000 35,50 13,00 35,50 13,00 13,00
00 0 0 0 0 0 0 0 0 0 0 0
profit/los - - 30,80 - 36,10 - 37,000 51,30 - 30,80 - -

s 13,00 13,00 0 13,00 0 13,00 0 13000 0 13,00 13,00
0 0 0 0 0 0
Closing 145,0 -8,000 - 9,800 -3,200 32,90 19,90 56,900 108,2 95,20 126,0 113,0 100,0
Balance 00 21,00 0 0 00 0 00 00 00
0
b) You are to present clear and logical recommendations on the cash flow budget to
management. The report should discuss the outcomes of the cash flow forecast and identify
areas for improvement and new approaches to the budget.
Guide: Medium to Long)
The cash flow budget is a forecast of income and expense, it is a road map for the
business and the success and failure is depending on the effectiveness of the budget.
Since the budget contain cash budget, wage budget, event budget, sales/revenue
budgets. It clearly shows that the business is hosting only four events yearly it will
need to pocket 1 or 2 more events at the end and beginning of the year to have enough

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cash in hand to make sure that they are not running on debt.
There few other area where the business can improve by reducing wage cost for the
months where there are no events. Furthermore, if the business can make sure that
they will secure the government grant for every year. Lastly the business need to
restructure.
Finally, the business need to attract more customer/events towards the end and the
beginning of the year to stay afloat.
2.4. Case Study

Read the case study and complete as indicated.
Below are the actual figures for Walters Restaurant for the last six months.
You are to investigate the figures for trends and for any figures that appear to not be correct.
# July August Septembe October Novembe Decembe Total

r r r
Income
Sales of 63,525 61,525 60,258 59,125 58,656 55,562 63,525

food
Sales of 22,630 22,634 23,653 24,526 25,851 26,861 22,630

Alcohol
Coffee 10,946 10,856 10,895 11,856 9,456 10,512 10,946

Total income 97,101 95,015 94,806 95,507 93,963 92,935 97,101
Expenses
Food 30,654 31,324 29,586 33,076 31,657 30,285 30,654

Purchases
Alcohol 10,213 10,583 12,682 13,694 14,896 15,854 10,213

Purchases
Wages 20,856 19,856 18,956 20,859 25,532 26,859 20,856

Superannua 1,929 1836 1753 1929 2,361 2,484 1,929
tion

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Rent 2,000 2,000 2,000 2,000 4,000 2,000 2,000

Other 13,125 13,563 13,221 13,681 14,874 12,980 13,125
Total 78,777 79,162 78,198 85,239 93,320 90,462 78,777
Expenses
Net 18,324 15,853 16,608 10,268 643 2,473 18,324

profit/loss
Write a report on financial data above giving detailed answers to the following questions.
Back up your answers with example figures and calculations to show the trend and mistake
or areas of concern.
a) Identify a possible logical error in expenses
b) Identify one positive trend in the figures that makes the profit higher as the month
passes
c) Identify three negative trends in the figures that are causing lower profits as the month
passes
d) Study the alcohol purchases for the six months and discuss any concerns you have!
Outline some possible causes for these results!
A) There is the logical error in the rent for the month of November. The rent is fixed
expenses.
B) Sales of alcohol is steadily increasing every month, which is the contributing factor to
increase profit as the month passes. So, this is the positive trend.
C) Sales of food is decreasing every month; total income is going down and the increase
in the expenses specially wages. These are the negative trends that are causing lower
profits as the month passes.
D) the steady increase in the alcohol purchase is observed but the sell of the alcohol is
not increasing same pace as purchase the probable cause may be the pricing error or the
selling price of alcohol haven’t been updated in the menu.
Your assessor will provide you with feedback on your assessment task and your presentation. You
must ensure to print this checklist, have it completed and signed by your assessor and upload the

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fully completed checklist with your assessment. Your task will not be marked if this checklist is not
completed.
ASSESSOR OBSERVATION CHECKLIST
Did the student demonstrate the following: Satisfactory Not Satisfactory
Use effective communication skills such as giving and receiving ☐ ☐

feedback, asking questions, listening to others
Used inclusive body language and made everyone comfortable ☐ ☐
Ability to use technology skills to prepare and present PowerPoint ☐ ☐

slides
Used effective presentation skills ☐ ☐
Ability to hold a meeting to discuss changes to income and expenses ☐ ☐

with appropriate colleagues
Ability to consult with and inform all relevant personnel of the ☐ ☐

importance of budget control and monitoring
Presented appropriate knowledge and understanding in budget ☐ ☐

resource allocation
Feedback on presentation from the assessor:
Outcome: q Satisfactory q Not Satisfactory`
Assessor Signature: Date:
2.5. You are required to demonstrate your ability to complete a comparative balance
sheet and gain an understanding of how to prepare budgets. You can do this in
consultation with your assessor who will provide you with feedback. Once you have
completed the tasks, discuss your answer with your assessor.
Prepare a balance sheet for the year ended 30 June 2009 for TML Ltd. Refer to the
additional information provided to complete the balance sheet.

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TMH Ltd. Comparative Balance Sheets for years ending 30 June 2008 and 2009
2009 2008
($) ($)
ASSETS
Current Assets
Cash 119,000 46,000
Accounts Receivable 124,000 134,000
Inventory 155,000 176,000
Total Current Assets 398,000 356,000
Non-current Assets
Land 140,000 140,000
Buildings 415,000 290,000
Less Accumulated (120,000) (105,000)

Depreciation
Total Non-current Assets 435,000 325,000
Total Assets 833,000 681,000
LIABILITIES
Current Liabilities
Expense Payable 124,000 124,000
Account Payable 197,000 197,000
Total Current Liabilities 321,000 321,000
Non-current liabilities
Long-Term 264,000 139,000

Borrowings
Total Non-current 264,000 139,000

Liabilities
Total Liabilities 585,000 460,000
OWNER’S EQUITY
Ordinary Share Capital 45,000 45,000

Retained Earnings 203,000
Page 25 of 47 176,000
Total Owner’s Equity 248,000 221,000

ASSESSMENT TOOL
Additional Information:
 Profit for year ended 31 June 2009 was $94,000
 Cash received from customers totalled $330,000
 Cash paid for inventory totalled $170,000
 Cash paid for expenses totalled $20,000
 Dividends paid during the year were: $67,000
 During the year, accounts receivable decreased by $10,000
 Cost of new buildings acquired during the year $125,000
2.6. You are now required to analyze the balance sheet utilizing both vertical and
horizontal ratio analysis. Document your answer in the space below.
(Guide: Short to Medium).
Vertical analysis of balance sheet used to show the relative size of the different accounts on
the a financial statement. For example, the total assets of the company will show as 100% ,
with all the other accounts on both the assets and liabilities sides showing as a percentage of
the total assets number.
Vertical ratio
Items 2008 Percentage 2009 percentage % Change from 2008
to 2009
Total 356,0 356,000/ 398,000 398,000/833,00 -4.49%
current 00 681,000 0 x100
Asset X100 = =47.78%
52.27%
Total non 325,0 325,000/681 435,000 435,000/833,00 +4.49%
current 00 ,000 x 100 0 x100
asset =47.73% =52.22%
Total Asset 681,0 100% 833,000 100%
00
Total 321,0 321,000/460 321,000 321,000/585,00 -14.91%
current 00 ,000 x100 = 0 x100
Liabilities 69.79% =54.88%
Total non 139,0 139,000/460 264,000 264,000/585,00 +14.91%
current 00 ,000x100 0 x100 =
liabilities =30.21% 45.12%
Total 460,0 100% 585,000 100%
liabilities 00

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Horizontal analysis of balance sheet used to shows the changes in the amounts of
corresponding financial statement items over a period of time.
Horizontal ratio.
Items 2008 2009 % change 2009 from 2008
Total asset 681,00 833,00 (833,000-681000) / 681000 ) x 100 percent =
0 0 22.33% increases from 2008 to 2009
Total liabilities 460,00 585,00 (585,000-460,000) / 460,000 ) x 100 percent =

0 0 27.17% increases from 2008 to 2009
Total owners 221,00 248,00 (248,000 –221,000) / 221,000 x 100 percent =

Equity 0 0 12.21 % increases from 2008 to 2009
2.7. Once the above statements are completed, you are required to further analyse the
company’s performance by comparing the above data with company goals as stated below
and explain how the company goals have varied from the actual data.
Your calculation should be based on the balance sheet figures where any missing sales and
profit information would be supplied by your assessor!
(Guide: Medium).
TMH Management had the following aims for 2009:

• To reduce liabilities by 5%
• To increase profits by 8%
• To increase sales by at least 5%
Were these goals met or the company failed to achieve them?
2008 2009 Budget Actual Goal Y/N
Liabilitie 460,000 585,000 To Reduce By (585,000-460,000) / No
s 5% 460,000 ) x 100 percent =
27.17% increases from
2008 to 2009
Profits 88500 94000 To Increase By (94000-88500) / 88500 No

8% x100 = 6.21% increase in
profit from 2008 to 2009
sales 297,000 320,000 To Increase by (320,000-297,000) / Yes
5% 297,000 x 100 = 7.74%
increase in sales from 2008

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to 2009
2.8. Case Study
You manage a small event management company. The business is growing steadily and you
have decided to develop a budget to help plan for future growth.
Over the past year, sales have been increasing by 6% per quarter, with the most recent
quarterly sales being $48,000. Your objective is to grow the gross profit by 8% per quart
higher than this projection offers.
Expenses for the last quarter have been as follows:
 Staffing (two staff) = $18,600
 Telephone/Internet = $680
 Rent = $3,600
 Advertising = $1,250
 Equipment Hire = $8,400
 Event catering = $13,850
Without any major changes, you are projecting that sales will continue to increase by 6%
per quarter, with equipment hire, event catering and telephone/internet expenses rising by
4%.
Instructions to students
You will be required to prepare a budget, finalise a budget, monitor and review the budget.
This task must be undertaken individually and presented professionally to your assessor.
The report must also be word processed and not hand written. You will have dedicated
time given to you by your trainer and assessor to complete this task.
a) Develop a report that includes the following information:
 What are your company’s objectives?
 What budgets will you need to prepare?
 What information will you use to develop a budget?
 Explain what internal and external factors might impact on the budget?
 Explain how you will involve your colleagues in the budget planning process.
 The objective are to increase the sell by 6% and gross profit by 8% per quarter.
 Cash flow budget, sells budget, profit and loss budget need to create.
 Sells and expenses are the important information as well as projected
percentages are also important piece of information will be used to develop a
budget.

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 Wastage, theft, wages are the internal factor where as market trend, global crisis ,
pandemic, environmental factor, government policy are the external factors might
impact the budget.
 Using bottom up technique by involving the staff as well as
Senior management, these are the people who are responsible for directing and
managing organization as whole. they plan and implement business strategy. While
making document we have to consult these people to adjust the budget and form the
budget according to the strategy and plan of the business. the accounts
department, : - the account department are the people dealing with the capital and
balance sheets/company income expenses. Since the document consists of capital
and money they have to be involved in this document creation process. budget
committee: budget committee are the people who have authority over the budget
and they are automatically involved in this process.
b) Calculate the next four quarterly budgets based on the prediction that the sales would
increase by 6% per quarter and the relevant expenses would increase by 4% per
quarter.
See spreadsheet 2.8 sheet B
c) Develop a second set of quarterly budgets where the profit is 8% higher than the
projected figures above. The relevant sales and expense figures should be revised
accordingly to achieve this goal.
See spreadsheet 2.8 sheet C
d) Once you have developed the budget, you are required to monitor and review the
budget. By the end of the first quarter you can see that your actual sales grew by only
4% and expenses were as follows:
 Staffing = $22,400
 Telephone/Internet = $580
 Rent = $3,600
 Advertising = $1,650
 Equipment hire = $9,800
 Event catering = $14,250
Prepare a variance calculation report showing the actual and budgeted profit and loss
figures for the first month, the favourable or unfavourable variance amounts and
suggestions for corrective actions everywhere necessary.
(Guide: Medium to Long).
See spreadsheet 2.8 sheet D

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ASSESSMENT TASK 3: PREPARE AND MONITOR BUDGETS

HOTEL FUTURA
Assessment type:
 Case study, meeting and practical activities

 This is the third assessment task where students are required to required to refer to the
scenario and spreadsheet for the Hotel Futura.
 You will also be required to meet with the management team and discuss, monitor and
review the budget.
 Student must complete all activities at the required level, e.g. provide the number of
points, to be deemed satisfactory in this task.
 Trainer/Assessor is required to provide feedback within two week
 s and notify student when results are available.
 The role play and presentation will be timed and you will be allocated approximately 10 to
15 minutes. You must consult your assessor prior to the presentation to ensure that the
work is your own and authentic.
independently.

 Evidence of the ability to complete tasks outlined in elements and performance criteria of
this unit in the context of the job role, and:
 prepare a budget for a business that meets the specific business’ needs
 demonstrate the following when preparing the above budget:
 consultation on components
 analysis of factors that impact on the budget
 completion of draft and final versions of budget within designated timelines
 monitor and review the above budget against performance over its life cycle.

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Short 30+ words
Medium 100+ words
Long 200+ words
3.1. Hotel Future Budget Forecast – read the scenario below and complete the activity.
Refer to the completed spreadsheet submitted by students and compare with the completed
Spreadsheet supplied as part of the Marking guide for this task
(Task 3.1-Hotel Futura Budget_Forecast_MG)
Scenario
You are a manager working for Hotel Future. After attending an executive meeting, you are
required to complete a draft budget based on information and factors that were determined
at the executive meeting at Hotel Futura.
You have met with the department heads of Hotel Futura and the following details have been
discussed to prepare your draft budget for 2018:
1. Rooms Division:
a. Due to renovations the rooms available have been reduced to 96%.
b. The forecasted occupancy rate has been adjusted to 80%.
c. The revenue per available room needs to be increased to $150.00
d. The COGS will increase to 15% of total room revenue
e. Staff costs need to be increased to 20% of total room revenue to allow for

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increases in superannuation and awards.

f. Other Expenses need to increase to 8% of total room revenue to cover electricity
price rises.
2. Catering:
a. The food revenue will be increased by 15% due to a new marketing campaign and
specialty menus
b. The beverage revenue will increase by 8%.
c. Staff costs need to be adjusted to 44% of the total food budget.
d. Other Expenses will need to be increased to 7%.
3. Banquet:
The Banquet Division will be directly affected by the new marketing campaign which
has been directed at daytime seminars and corporate functions. For this purpose, the
kitchen has received specialised equipment including multiple combi steamers, hold-o-
mats and sous-vide equipment.
a. The new food revenue budget was set at $ 2,000,000.00 ($2 Million) and the
beverage revenue was increased by 75%.
b. The COGS will increase to 26%.
c. The staff costs have been reduced to 19%.
d. Other Expenses will need to increase to 14%.
4. Room Service:
a. The room service revenue from food needs to be increased by 15%.
b. Due to a different system to clear floors and organise delivery, the staff costs will
be reduced to 34%.
5. Mini Bar:
The mini bar budget remains unchanged and increased staff costs are absorbed
through different processes.
6. Bar Budget:
a. The food revenue budget has been increased by 25% with the implementation of a
Tapas Menu.
b. The Beverage Revenue budget has been increased 20% with the introduction of a
new cocktail bar and happy hour specials.
c. Staff costs will need to be adjusted to 36%.
d. Other Expenses need to be increased to 18%.

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A. Access the excel spreadsheet named “Task 3.1-Hotel Futura Budget_Forecast”. The first tab
on this spreadsheet is labelled “Departments Small” and shows the existing budget figures
for the 2017 financial year.
B. Use the template “Draft Budget” on the second tab of the spreadsheet and perform the
calculations below using basic formulas.
Your forecast needs to include the Dollar Figures and the % values for these affected by
changes outlined below.
The % values must be listed for each expense item shown in the Expenses Analysis for
each department.
Refer to the completed spreadsheet submitted by students and compare with the completed
Spreadsheet supplied as part of the Marking guide for this task
Task 4.2- Budget Futura_Restaurant_Bar_MG). The tables below are extracted from the
Spreadsheet.
3.2. Read the scenario below and complete the activity.
You have provided the Chief Financial Controller with the draft budget for 2018. Following the
recent executive meeting where the draft budget was discussed, you are now required to
establish the final budget reflecting the changes based on the latest actuals and variances as
well as major road works which will affect Futura Restaurant and Bar during 2018.
A. Access the excel spread sheet named “Task 3.2-Budget Futura_Rest.&Bar”. The first tab on
this spreadsheet is labelled “Futura Restaurant and Bar” and shows the Draft budget
figures for the 2017 financial year.
B. Use the template “Revised Budget” on the second tab of the spreadsheet and perform the
calculations below using basic formulas based on the following changes:
Month Customer numbers Average Spend (Food) Average Spend (Beverage)
January 1850 $ 45.00 $ 9.70
February 2000 $ 37.00 $ 9.70
March 700 $ 42.00 $ 9.70
April 1200 $ 48.00 $ 9.70
May 1200 $ 36.50 $ 9.70
June 600 $ 35.00 $ 9.70

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July 950 $ 34.00 $ 9.70
August 800 $ 38.00 $ 9.70
Septembe $ 9.70
r 900 $ 29.00
October 650 $ 29.50 $ 9.70
November 980 $ 35.50 $ 9.70
December 2200 $ 48.00 $ 9.70
a) Calculate the anticipated Food revenue for each month and the yearly total.
Month Customer numbers Average Spend (Food) Food Revenue
January 1850 $45 $83,250

February 2000 $37 $74,000
March 700 $42 $29,400
April 1200 $48 $57,600
May 1200 $37 $43,800
June 600 $35 $21,000
July 950 $34 $32,300
August 800 $38 $30,400
September 900 $29 $26,100
October 650 $30 $19,175
November 980 $36 $34,790
December 2200 $48 $105,600
Total 14030 $557,415
b) Calculate the anticipated Beverage revenue per month and the yearly total.
Month Customer numbers Average Spend Beverage Revenue
(Beverage)
January 1850 $9.70 $17,945

February 2000 $9.70 $19,400
March 700 $9.70 $6,790
April 1200 $9.70 $11,640
May 1200 $9.70 $11,640

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June 600 $9.70 $5,820

July 950 $9.70 $9,215
August 800 $9.70 $7,760
September 900 $9.70 $8,730
October 650 $9.70 $6,305
November 980 $9.70 $9,506
December 2200 $9.70 $21,340
Total 14030 $136,091
c) Calculate the Total Revenue for each month and the yearly total.
Month Customer Average Food Average Beverage Total
numbers Spend Revenue Spend Revenue
(Food) (Beverage)
January 1850 $45 $83,250 $9.70 $17,945 $101,195

February 2000 $37 $74,000 $9.70 $19,400 $93,400
March 700 $42 $29,400 $9.70 $6,790 $36,190
April 1200 $48 $57,600 $9.70 $11,640 $69,240
May 1200 $37 $43,800 $9.70 $11,640 $55,440
June 600 $35 $21,000 $9.70 $5,820 $26,820
July 950 $34 $32,300 $9.70 $9,215 $41,515
August 800 $38 $30,400 $9.70 $7,760 $38,160
September 900 $29 $26,100 $9.70 $8,730 $34,830
October 650 $30 $19,175 $9.70 $6,305 $25,480
November 980 $36 $34,790 $9.70 $9,506 $44,296
December 2200 $48 $105,600 $9.70 $21,340 $126,940
$693,506
Total 14030 $557,415 $136,091 $693,506
d) Calculate the overheads total for each month (at 90% of turnover for each for each
month with 1000 or more customers and at 96% for each month with less than 1000
customers) and the yearly total.
Month Total Overheads

January $101,195 $91,076
February $93,400 $84,060
March $36,190 $34,742
April $69,240 $62,316
May $55,440 $49,896

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June $26,820 $25,747

July $41,515 $39,854
August $38,160 $36,634
September $34,830 $33,437
October $25,480 $24,461
November $44,296 $42,524
December $126,940 $114,246
$638,993
Total $693,506 $638,993
e) Calculate the profit for each month and the yearly total.
Month Total Profit Overheads
January $101,195 $10,120 $91,076

February $93,400 $9,340 $84,060
March $36,190 $1,448 $34,742
April $69,240 $6,924 $62,316
May $55,440 $5,544 $49,896
June $26,820 $1,073 $25,747
July $41,515 $1,661 $39,854
August $38,160 $1,526 $36,634
September $34,830 $1,393 $33,437
October $25,480 $1,019 $24,461
November $44,296 $1,772 $42,524
December $126,940 $12,694 $114,246
Total $693,506 $54,513 $638,993
f) Calculate the Cost of Goods Sold for food and beverages, given a combined percentage
of 32%.
Month Total COGS - Food &

Beverage
January $101,195 $29,144

February $93,400 $26,899
March $36,190 $11,118
April $69,240 $19,941
May $55,440 $15,967

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June $26,820 $8,239

July $41,515 $12,753
August $38,160 $11,723
September $34,830 $10,700
October $25,480 $7,827
November $44,296 $13,608
December $126,940 $36,559
Total $693,506 $204,478
g) Calculate the staff costs for each month at 31% for each month with 1000 or more
customers and at 35% for each month with less than 1000 customers.
Turnover Total Staff Costs
January $101,195 $28,233

February $93,400 $26,059
March $36,190 $12,160
April $69,240 $19,318
May $55,440 $15,468
June $26,820 $9,012
July $41,515 $13,949
August $38,160 $12,822
September $34,830 $11,703
October $25,480 $8,561
November $44,296 $14,883
December $126,940 $35,416
Total $693,506 $207,584
h) Calculate the ‘Other overheads” for the operation.
Turnover Overheads COGS - Food Staff Costs Other Overheads

& Beverage
January $91,076 $29,144 $28,233 $33,698

February $84,060 $26,899 $26,059 $31,102
March $34,742 $11,118 $12,160 $11,465
April $62,316 $19,941 $19,318 $23,057
May $49,896 $15,967 $15,468 $18,462
June $25,747 $8,239 $9,012 $8,497

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July $39,854 $12,753 $13,949 $13,152

August $36,634 $11,723 $12,822 $12,089
September $33,437 $10,700 $11,703 $11,034
October $24,461 $7,827 $8,561 $8,072
November $42,524 $13,608 $14,883 $14,033
December $114,246 $36,559 $35,416 $42,271
Total $638,993 $204,478 $207,584 $226,931
i) Print a copy of the revised budget.

Refer to spreadsheet and compare
See attached spreadsheet task 3.2
j) Print the revised budget showing all formulae used.
Refer to spreadsheet and compare
See attached spreadsheet task 3.2
3.3. Read the following 3 scenarios and answer the questions attached for each scenario.
Scenario 1:
The finance team has created budget forecasts for Hotel Futura based on carefully researched
factors for the last 3 years and these were always very accurate. The recent budget which
included all departments of the hotel was implemented 3 months ago and the forecasted
figures for Food Cost and COGS/Beverages in both the Restaurant and the Bar Operations
have blown out by nearly 4.5 percent.
a) What could be the reasons for this? List 5 examples of areas you would investigate and
explain why.
(Guide: Medium to Long).
The financial records may not match the budget due to various reason.
 Lack of training of staff and Labor cost: lack of training may contribute the staff to
over portion the beverages as well as another reason can include Labor costs - are
affected both by the budgeted pay rate and the number of hours that employees
work.
 Supplier could increase the cost of Material: The cost of materials is the other major

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ASSESSMENT TOOL
factor in the budget variance. The company budgets for a certain price of raw
materials that it expects to use to make each product.
 Unpredicted cost: Many a budget has been blown up by an unexpected expense for
example broken machinery like example fridge.
 Theft/pillfridges: some times the variance is occurring due to theft from the staff
member o
 Wastage/Damaged goods: these may be one of the reason for the budget and actuals
are not matching as well as Pricing error in the menu can be one of the reason that
sells are not as good as compare to the purchased amount.
Scenario 2:
Hotel Futura has successfully operated for 7 years. During this period, overall turnover has
doubled, and during the past 3 budget periods annual budgets have been increased by 15%
each year which was exceeded each time. During the last 6 months however, management
has noticed that the opposite trend seems to be occurring now
b) List 5 external factors which could contribute to this and explain which methods you would
use to determine this.
(Guide: Medium).
 Input or suppliers: the suppliers may be charging extra or the price of goods are
costing more that expected
 Disasters or pandemic: for example covid 19 crisis has led the businesses to
partially open and this is contributing in getting less customer and eventually
leading to low income/sells
 Government taxation policy/rules : The rules and regulations from local
government play an integral role in the business budgeting.
 Economical downturn: Economy is one of the most determining factors to the
success of the company even though it is an external element. Within the
economy, some contributing factors such as the fluctuation of interest rate,
economic crisis, and so on directly and strongly affects the consumption of buyers,
and consequently, the profits of businesses.
 Competition: Competition exists in any field of our life, even in business. When it
comes to competition, if not prepared to change in competitive market, the

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ASSESSMENT TOOL
business may be negatively influenced due to scaring investors, market

expectations increase, competitive price and customer disloyalty.
Scenario 3:
You have successfully negotiated the draft budget with each department head of the Hotel
which has now been approved by the director and implemented 6 weeks ago.
You have finalised the financial data of the Hotel for the next management meeting and
noticed the following:
a.
Department Budget Actual Variance
Kitchen/Food Cost 28% 32% (-)$ 13467
b. The recently appointed F&B Manager has purchased 240 bottles of Hill of Blessings @
$90 each which represents a saving of $30 per bottle. However this exceeds the par
stock level by 220 bottles and has created a cash flow problem, given the negative
performance of the kitchen during this period as well.
a) Which reports would you need to prepare for these issues?

(Guide: Medium).
Variance report: the variance report can be used to analyze the difference between
budgets and actual performance. This will allow the business to adjust the budget
accordingly.
Stock take report will help to identify that the manager have over stocked stock due
to over purchasing . As well as the cash flow report will have to take into
consideration with regards to over purchasing.
b) Who is it essential to involve when these matters need to be discussed?

(Guide: Medium).
Those who may be Involve when these matters needed to discussed are.
Senior management/F&B manager: these are the people who are responsible for
directing and managing organization as whole. they plan and implement business
strategy. While making document we have to consult these people to adjust the

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budget and form the budget according to the strategy and plan of the business.
the accounts department, : - the account department are the people dealing with
the capital and balance sheets/company income expenses. Since the document
consists of capital and money they have to be involved in this document creation
process.
budget committee: budget committee are the people who have authority over the
budget and they are automatically involved in this process. As well as F&B manager’s
views also needed for these matters.
c) Suggest options to address and rectify these issues.

(Guide: Medium).
Quick sell of extra bottle of wine by introducing promotional sells and encourage the
staff to do upselling. Another way by pairing wine with food and selling. One more
option would be asking for installment payment of these wine to the supplier or even
return or refund can help to fix the cash flow issues.
d) How could the cash flow issue be addressed?

(Guide: Medium).
A cash flow budget is an estimation of the cash inflows and outflows for a business
over a specific period of time. This budget is used to assess whether the entity has
sufficient cash to operate. Companies use sales and production forecasts to create a
cash budget, along with assumptions about necessary spending and accounts
receivable Where possible, raise the prices of products or services with weak
margins. If manager can't raise prices, they should consider dropping products or
services with weak margins. Ensure all proposals price of products and services
according to their cost.
3.4. Based on the type of budget and data provided to you, you are required to complete the
following activities:
a) Consult with the relevant staff such as department heads, events manager) directly
affected by the budget on the components to be included in the budget. This requires a
written report of the details that were discussed including a detailed analysis of the
factors that impact on the particular budget. For the purpose of this activity, your
assessor will act as the relevant staff. (Guide: Long).
To the concerning departments.

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After analyzing the above scenario presented in, there are few factors which are
directly affecting the performance of the budget and after evaluating the data and
variance the following are the areas contributing the most to the low performance in
budgeting.
Rooms Division: Head of department.
The very first thing that is affecting the positive outcome of the budget is the Less
occupancy and less room available due to renovation. It is mainly the hotel is
spending money for the renovation of the rooms.
Room availability have been reduced to 96% and the we have adjusted the
occupancy rate to 80% as well as the revenue per available room has been
increased to 150%. The cost of goods is increased to 15% of total rooms revenue
and staff cost needed to increase to 20% of total room revenue. Other expenses are
increased to 8%
For Room Service: The room service revenue from food needs to be increased by
15%.
b. Due to a different system to clear floors and organize delivery, the staff
costs will be reduced to 34%.
2. Mini Bar:
The mini bar budget remains unchanged and increased staff costs are absorbed
through different processes.
Food and beverage budget: F&B head
For catering food revenue increased by 15%, beverage revenue increased by 8%,
staff costs adjusted to 44% and other expenses increased to 7%
For banquet food revenue was set at $ 2 million, beverage revenue increased by
75%, coGS increased to 26%, staff cost increased to 26%, and other expenses
needed to increase to 14%
Far bar the food revenue increased by 25% , beverage revenue increased by 20%,
staff costs adjusted to 36% and other expenses increased to 18%
Furthermore,
F&B manager : Over purchasing of the 240 bottles of Hill of Blessings @ $90 each
which represents a saving of $30 per bottle. However this exceeds the par stock
level by 220 bottles and has created a cash flow problem, given the negative
performance of the kitchen during this period as well and the variance was recorded
negative –4%. This has created the cash flow issues and to rectify we need to Quick
sell of extra bottle of wine by introducing promotional sells and encourage the staff

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ASSESSMENT TOOL
to do upselling. Another way by pairing wine with food and selling. One more option
would be asking for installment payment of these wine to the supplier or even return
or refund can help to fix the cash flow issues.
b) Following your consultation, you are required to complete a draft budget which reflects
the details you have provided in your report. Attach a copy of the budget. (Guide: Short)
See the attached spreadsheets 3.1 and 3.2
c) Present the draft budget to the staff (your assessor) you consulted on the budget
components. Provide details of feedback and changes that were requested. This needs
to include the why’s and how’s. Document your feedback below. (Guide: Medium).
To the concerning departments.

A few factors which are directly affecting the performance of the budget and after
evaluating the data reports and variance reports the following are the areas are
affected by the changes in budget.
Rooms Division: changes in budget due to renovation and decreased
occupancy some budget changes were required.
Food and beverage budget: to achieve the desired revenue there were
changes in budget required.
F&B manager : Over purchasing of the 240 bottles of Hill of Blessings @ $90 each
which represents a saving of $30 per bottle. However this exceeds the par stock level
by 220 bottles and has created a cash flow problem, given the negative performance
of the kitchen during this period as well and the variance was recorded negative –
4%. This has created the cash flow issues and to rectify we need to Quick sell of
extra bottle of wine by introducing promotional sells and encourage the staff to do
upselling. Another way by pairing wine with food and selling. One more option would
be asking for installment payment of these wine to the supplier or even return or
refund can help to fix the cash flow issues.

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ASSESSMENT TOOL
d) Based on the feedback received, complete the final budget. Obtain approval of the
relevant department head(s), financial officer or person in charge of the organization
(your assessor). Attach a copy and the signed, approved budget. (Guide: Short)
See attached spreadsheets 3.1 and 3.2
e) You are required to monitor the budget against performance at intervals as instructed,
this may be e.g. weekly or monthly and include the relevant reports and actions taken
for each review during the budget cycle.
Each change actioned taken as a result of underperformance must be documented and
signed by the authorised person in the workplace. Explain how you are going to achieve
this? (Guide: Long)
Managing budgets requires the businesses to constantly monitor, control, and record
income and expenditures to keep track of every cash flow records and every financial
movement and its outcome.
1 monitoring income and expenditure: budget monitoring is done to make sure that
resources are being utilised as per plans on the budget. Income and expenditures
need to be monitored to find any change in patterns so that appropriate actions can
be taken.
2.to control income and expenditure: is the next important issue. Without this
organisation will be spending money out of track. The amount of finances available
for a particular year should reflect the total expenses planned for that particular year.
3. recording income and expenditure: All the accounts related to income and
expenditure, any income that is due in, any payments that were received, receipts
and invoices issued, debts etc., need to be recorded clearly with date and purpose.
Recording income is a way of determining whether the business is making profit or
not, because it includes details of money received and spent.
In addition to the above the most important thing to remember when monitoring the
budget against performance are to keep track of the cash flow, preparing the tax
return and understanding the overall financial position by gathering and completing
following documents;
1. Receipts and invoices for goods and services that the hotel buy and sell.
2. Staff roster, attendance and pay records.
3. Contractor records.
4. Bank statements.
5. A register of the business assets.

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6. Depreciation schedules.
7. Tax documents including activity statements and annual tax returns.
8. Documents showing how the business is financed e.g. any business loans and/
or shares in the business.
9. Insurance documentation/ leases/ business registration documents.
10. Financial records, such as bank accounts, tax file numbers and superannuation
details of an employee. Etc
f) On completion of the budget cycle, explain how you can review and analyse the
changes in internal external environment and make necessary adjustments to assist in
future budget preparation. Use the space below to explain in your own words. (Guide:
Short)
The review and analysis of the internal environment changes can be achieved by
Staffing costs , Making sure Pricing will reflect cost of the product.
External factors:
Making sure that the supplier is providing product for lowest market cost.
Making sure the business have loss in income insurance in case of pandemic. Etc.
The assessor must complete the checklist below. Students are to print, organise to have this
checklist completed and then upload the checklist with the assessment task. The assessment task
will not be assessed unless this checklist is attached.
Satisfactory /
Not Yet Satisfactory
Did the student demonstrate the following?
Yes No

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ASSESSMENT TOOL
Effective communication skills to discuss budget requirements

☐ ☐
and seek and provide feedback
Ability to liaise and negotiate with colleagues on potential

☐ ☐
complex and conflicting budget requirements.
Draft budgets that meet organisational objectives and interpret

and analyse financial information from forecasts and previous ☐ ☐
performance data
Developed financial estimates and scenarios using complex

☒ ☐
calculations
Feedback to student
Outcome: q Satisfactory q Not Satisfactory
Assessor’s signature: Date:

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ASSESSMENT TOOL

Qualification: SIT50416 Diploma of Hospitality Management

ASSESSMENT TASK 1: KNOWLEDGE QUESTIONS

Assessment task description:

Purpose of the assessment

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

Benchmark for Assessment

Financial Records Purpose

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

A cash flow budget is an estimation of the cash inflows and

Wage budget A wage budget is the amount of estimated money spent on an

Departmental budgets The departmental budgets refer to the money departments

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

Event budgets Event budget is a forecast of the income and expenditure of an

Project budgets It is the projected cost needed to complete a particular project

Purchasing budget Purchasing budget is a forecast of quantity and value of

Sales budgets Sales budget is a crucial part of an overall small business

Master budget The master budget is the aggregation of all lower-level

1.3. Explain the following accounting terminologies used in budgeting.

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

 growth or decline in economic conditions

1 Analogous Analogous estimating uses the actual data from a previous as

2 Parametric Parametric is more accurate, specifically when the underlying

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

3 Three point Three-point estimating produce three estimates based on

4 Bottom up Bottom up estimating is the most accurate and time-consuming

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

Task outcome: q Satisfactory q Not Satisfactory

ASSESSMENT TASK 2: MANAGE FINANCES WITHIN A BUDGET

Assessment task description:

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

Purpose of the assessment

Benchmark for Assessment

2.1. Case study

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

You own a small travel services business.

Month 1 Month1 Month 2 Month 3

Sales $50,000 $45,000 $50,000 $37,500

Purchases 22,000 20,000 22,000

Advertising 500 2,000 500

Cleaning costs 500 500 500

Office supplies 2,000 1,750 2,000

Repairs & 1,000 3,000 1,000

Telephone and 1,500 1,000 1,500

Wages & on-costs 10,000 10,000 10,000

Profit (or Loss) $12,500 $6,750 $12,500

Month 1 Month1 Favorable or

Sales $50,000 $45,000 -5000 unfavorable

Purchases 22,000 20,000 -2000 Favorable

Advertising 500 2,000 1500 Unfavorable

HD_4.2_ SITXFIN004 Assessment Tool Version 3 Issued 8 May 2019

Cleaning costs 500 500 0 Favorable

Office supplies 2,000 1,750 -250 Favorable

Repairs & 1,000 3,000 2000 Unfavorable

Telephone and 1,500 1,000 500 Favorable

Wages & on-costs 10,000 10,000 0 Favorable

Profit (or Loss) $12,500 $6,750 -5750 Unfavorable

The area which require a corrective action are

Months vs. Month 1 Month1 Month 2 Month 3