Analyse Operating and Financial Budgets -

Question:

This assessment requires you to calculate and analyse operating and financial budgets

This assessment consists of 4 tasks. You must complete all the following tasks.

Task 1-Estimating occupancy rate

Task 2- Preparing annual profit & loss budget

Task 3 – Preparing profit & loss budget on quarterly basis

Task 4- Prepare cashflow budget

In order to achieve a satisfactory outcome in this assessment, you must satisfactorily complete all the observation skills listed in the marking guide.

Assessor will inform you the submission date for this assessment. It recommends allocating approximately 6 hours for this assessment.

You could complete this assessment in the classroom, computer lab or self-paced.

You must use spreadsheet software and/or word processing software as per the instructions given in each task.

Your assessor will provide you with the soft copies of the required templates for this assessment

Recommended font sizes of the document should range between 10 and 14 and font type should be as Calibri, Arial, Times New Roman or Tahoma

On completion, you are required to submit all the parts to your assessor

Ask your assessor, if you do not understand a question. Your assessor cannot tell you the answer he/she may be able to re-word the question for you

You must use only black or blue pens to complete any document.

The additional and specific instructions are listed under each task

Task 1

You must read the following information and document your responses to the contents given in the below template.

You must use word processing software to complete this task.

You have owned an accommodation business for a few years, but only began to prepare operating and financial budgets for the business last year. Your actual figures for the previous year show that the business is not achieving the profits you forecasted and wish to achieve.

Your actual occupancy rate for the previous year was 70%. It’s time to start preparing budgets for the next financial year. You believe that, with an annual advertising and marketing campaign costing $60,000 (+GST), you can increase the overall occupancy rate to 75%.

List four internal factors you must consider when estimating next year’s occupancy rate
List four external factors you must consider when estimating next year’s occupancy rate

Task 2 – Prepare the annual profit & Loss budget

1. Refer to the “Budget-Part 4” given by your assessor

2.Using the information provided in Tasks 1 and in the budget,apply an incremental budgeting approach to prepare the annual profit and loss budget. Complete Option 1 in the tableby basing your calculations on an increased room rate of $125 and anticipated wage rises of 2.5%. Ignore GST. Show your calculations and formulas. Compete the shaded fields.

3. Using the information provided in Tasks 1 and 2 and the results of calculations in Q1, complete Option 2 in the annual profit and loss budget.Base your calculations on reducing current room rate by 10% and anticipated wage rises of 2.5%. Ignore GST. Complete the shaded fields.

4. Round all figures to the nearest whole number.

5. You must use spreadsheet software to complete this task.

Task 2.1 Question and answer

You could use word processing software to complete this task

1: Evaluate the impact of the different room rates and wage rises on the business. Explain your response,referring to the financial data, information, calculations or budget forecasts you have based your explanation on when necessary.

2: What specific information should you seek about your competitors prior to making any decisions?

3: What recommendations would you make to increase projected profit? Briefly list the benefits and challenges of your recommendation.

While showing your new budget to the business manager, you both realise that preparing an annual budget is inadequate for managerial planning and control purposes. The budget cycle should be adjusted to show quarterly and in some cases monthly progress against the budget.

4: Why do you think this change is necessary?

Task 3 – Prepare a profit & Loss budget on quarterly basis

1.Complete Task 3 using the same “Budgets Part 4” given by your assessor and the information below

2. Prepare a profit and loss budgeton a quarterly basisfor the summer and winter quarters. (Hint: the fixed costs will be one quarter of the annual total!).

3. Base your tariff revenue calculations on a room rate of $125 per night. Base your wage and salary calculations on the figures calculated in Option 1 of the profit and loss statement in Task 2. Ignore GST. Complete the shaded fields in the “Budget-Part 4.

4. Round your figures to the nearest whole number.

5. You must use spreadsheet software to complete this task.

Task 3.1: Question and answer

You must use word processing software to complete this task

1: Do you believe the even distribution of all fixed costs across the four quarters is a reasonable or accurate assumption? Explain the reasoning for your response.

2: In light of the huge differences in profits between the busy summer months and the quiet winter months, outlineyour recommendations for improving the business’s profitability.

Task 4 – Prepare a cashflow budget

1. Complete Task 4 using the same“Budget Part 4” given by your assessor

2. Additional information

All customers are charged 10% GST.

85% of customers pay their bills (including GST) within the same quarter of their stay at your establishment.

The other 15% of customers pay in the following quarter.

All expenses (other than depreciation) are paid in the quarter in which they are incurred.

Figures provided for autumn quarter cash outflows are GST inclusive.

All winter cash outflow figures in the above budget are GST free. GST must be calculated and added to all GST-attracting outflow figures in the cash flow statement.Ignore PAYG deductions for this activity.

All payroll on-costs are included in the figures provided in the budget above.

The cash balance at the beginning of the winter quarter is $5,000.

3. Prepare a cash flow budgetfor the winter quarter based on the following assumptions.Complete the shaded fields

4. Round your figures up to the nearest whole dollar.

5. You must use spreadsheet software to complete this task.

Task 4.1: Question and answer

You could use word processing software to complete the task 4.1 & 4.2. Alternatively you could do the calculations manually however you must show the calculation steps.

Refer to the cash budget in Task 4. Your business arranges a short-term loan at the beginning of the winter quarter of $20,000 for three months (repayable in three months’ time with interest charged at 1% per month).

1: What would the total cash inflow be during the winter quarter?

2: Calculate the cash outflow for the quarter.

3: You’re considering opening a new division within the establishment to improve your service to customers. Write a list of the factors you need to consider when evaluating this proposal.

Task 4.2: Complete the contents in the report based on the following incident.

You receive the following email from a dissatisfied customer.

‘I rocked up late to your reception desk – tired and worn out from a long drive with three cranky kids in the car! Your receptionist offered me a $50 discount if I paid cash. Well of course I couldn’t pass up such a good opportunity, so I paid my $50.

But the next day when I checked out and asked for a receipt, she refused. I’m not impressed! That’s no way to run a business!’

Read less