SITXFIN004 – Assessment 2
Prepare and
Monitor
Budgets
Yossawat Yodmongkon 11747
Table of Contents
Academia Resort – Budget……………………………………………………………….3
Academia Resort Calculation……………………………………………………………4
Report………………………………………………………………………………………….. 6
Consultation on Budget Components…………………………………………….6
The impacts of loss in Net proft and the reason for it and explain how
you would try to maintain a positive business to meet new
requirements. Investigate and take appropriate action on signifcant
deviations.………………………………………………………………………………..7
Monitor and review…………………………………………………………………….8
Analysis of factors that impact on the budget…………………………………9
Academia Resort – Budget

28% Increase in Profit 270,784.00
Academia Resort Calculation
Academia Resort anticipates the following changes in the business
environment:
 Management expects an increase in interest rates of 0.25% per quarter.
1st Quater

0.25% 43.75
2nd Quater 0.25% 43.86
3rd Quater 0.25% 43.97
4th Quater 0.25% 44.08
 The Resort has 7,270 guests a year and all food and beverage revenue come from
these guests.
 Fall in patronage of 12%.

 The guests will be willing to spend more per head if the staff up sells successfully –
management expects a 20% increase in both food and beverage average sales.
Guests spend per head (2018-2019)
Food $219,000.00 ÷ 7270

Beverage $73,000.00 ÷ 7270 Guests will spend more 20% per head Spend more $ / person
Food 30.12 X 20% = $6.02 + 30.12 36.14
Beverage 10.04 X 20% = $2.01 + 10.04 12.05

 The Resort has twelve rooms and has 83% occupancy rate annually.
 Room rate is $120.00 per day. These rooms are all twins.

83% = 10.0
2 = 3,199
$120 = $383,856.00
 Staff wages represent 25% of total revenue and management decided that in
order to ensure good service this percentage must remain the same.
Food Beverage Accommodato
n
Total Revenue $231.223.7
2
+ $77,095.9
0
+ $383,880 = $692,199.6
2
Staff wages represent 25% of total
revenue
$692,199.6
2
x 25% = $173,049.91
Food Beverage Accommodato
n

Total COGS $57,816.00 + $23,126.40 + $76,771.20 = $157,713.6
0
Gross Proft $692,208.0
0
– $157,713.6
0
= $534,494.40
After producing the new budget, you are required to calculate the variance,
percentage change and also prepare another budget that allows for a proft
of 28%.

Reduce cost of sale : Food $246,691.46 X 24%

Reduce cost of sale : Beverage $82,209.16 X 29% Reduce cost of sale : Accommodaton $383,856.00 X 19% Reduce Expenses Wage $692,199.62 X 24% = $166,127.91
Report
A decrease on number of the customers have an impact to loss of net proft. 12%
of fall patronage. By analyzing the budget from the current year and cost increases, it
will determine the proft loss and you can allocate a budget on the areas which is
impacted for making improvement and to gain more proft. Strategies will help.
Marketing can be a great factor for a business to grow and gain proft. In hospitality to
attract customers.
Consultation on Budget Components
The person or team of people responsible for developing the budget must consult
with key personnel in the organisation for two main reasons:
 It is important to utilise the wealth of knowledge within the organisation to
ensure that the budget is as accurate as possible
 It is also important to ensure that key people in the organisation feel they have
been consulted otherwise there could be trenchant criticism of the fnal budget,
and an unwillingness to work within the budget parameters.
The methods for consultation include:
 One-to-one meetings with key personnel. This is probably necessary for some
key personnel for both the reasons above. One-to-one meetings allow for
questions to be asked by the budget developer, time for serious consideration
by the person being consulted, direct delivery of quality information and
feedback.
 Email out specifc budget worksheets to specifc individuals (i.e. coaching
worksheets to the coaching director) and ask for input, comment and/or
feedback. It may be necessary for worksheets to be emailed backwards and
forwards several times with each amendment.
 Invite key personnel to a budget meeting or part of a committee meeting given
over to budgeting. This promotes good all-round discussion but some good
management of the meeting needs to occur so that no-ones time is wasted.
Basically the consultation process needs to bring to light whether there are any
gaps or errors in the budget workings so far. It is easy for the budget developer to
miss important items but key personnel who have responsibility for areas of operation
of the organisation will identify problems relatively quickly.
Many people are not that good at working with fgures and so the consultation
process sometimes needs to encourage people to give feedback.
The information that you need from those you consult includes:
 Priority items of expenditure to enable agreed strategies in the business plan to
be implemented. However it is important to consider that many items may be
listed as a necessary but that does not make them affordable. This is why you
need to know priorities, so that the budget team can differentiate between
“absolute necessity” and “nice to have”. In the case of consumables,
equipment and clothing, you need the most up-to-date unit costs and the
quantities involved. This saves the budget developer from doing this work.
 The dates or months when must expenditure occur to implement strategies?
Income, for many organisations, is not generally evenly distributed on a monthto-month basis. There are important considerations for cashflow budgeting.
 In regard to items of income, the budget developer needs information to be
able to determine minimum income fgures. Questions need to be asked such “
what is the minimum of people expected to participate in this event” or “what
is the minimum number of people needed to ensure this event goes ahead”.

The impacts of loss in Net proft and the reason for it and explain
how you would try to maintain a positive business to meet new
requirements. Investigate and take appropriate action on
signifcant deviations.
A low net proft margin means that a company uses an ineffective cost structure
and/or poor pricing strategy. Therefore, a low ratio can result from:
 Inefcient management
 High costs (expenses)
 Weak pricing strategies
Low revenues contribute to net losses. Strong competition, unsuccessful marketing
programs, weak pricing strategies, not keeping up with market demands, and
inefcient marketing staff contribute to decreasing revenues. Decreased revenues
result in decreased profts. When profts fall below the level of expenses and cost of
goods sold (COGS) in a given time, a net loss result.
COGS also affect net losses. Substantial production or purchase costs of products
being sold are subtracted from revenue. The remaining money is used for covering
expenses and creating proft. When COGS exceed funding for expenses, a net loss
occurs.
KEY TAKEAWAYS
 Net loss, sometimes called a net operating loss (NOL), is when expenses
exceed the income or total revenue produced for a given time period.
 Companies must report their net profts or net losses on their income
statements.
 Many factors can contribute to a net loss including low revenues, strong
competition, unsuccessful marketing campaigns, and increased cost of goods
sold (COGS).
Analysis’ is just another word for ‘Investigation’ – this means you dig deep into the
activities behind the information on your Budget to discover the reasons this variance
arose; Many many things in business can change on a daily basis, this is a process of
narrowing down exactly what has changed so you can understand how it is impacting
your business and what to do about it.
1.Was there a good/bad decision?
2.Did the market change?
3.Have prices moved?
4.Are customers’ needs different?
1. POSITIVE VARIANCES – anything that boosts profts
• Better than expected result
• Costs lower than expected
• Revenue higher than expected
2. NEGATIVE VARIANCES – anything that reduces proft
• Worse than expected result
• Costs higher than expected
• Revenue lower than expected
Monitor and review
Regularly review budget to assess actual performance against estimated
performance and prepare accurate fnancial reports.
 Incorporate all fnancial commitments into budget and budget reports.
 Investigate and take appropriate action on signifcant deviations.
 Analyse changes in internal and external environment and make necessary
adjustments.
 Collect and record relevant information to assist in future budget preparation.
To monitor expenditure, the types of information you need include:
 budget for the area of activity for the full year and profled for the year to date.
When profling the budget, planned expenditure patterns should be considered. For
certain types of expenditure (particularly non-staff costs) it is likely that
expenditure will peak and trough at particular points in the year
 actual expenditure to date
 future expenditure commitments
 balance of annual budget remaining. When actual expenditure and commitments
together are compared to the full year budget, this will indicate the balance of
budget remaining at the review point
 forecast outturn. This is the expected position against budget at the end of the
year after taking into account all anticipated expenditure. The forecast outturn
may not be equal to the original budget
 analysis and explanation of any positive or negative variances when comparing
expenditure and forecast outturn to budget, together with a documented action
plan in order to address adverse variances
Analysis of factors that impact on the budget
Factors that can result in a decreased budget would include a loss or market share,
a reduction in selling price, new frms entering the market, or a product entering the
end stage of the product life cycle. All of these elements can decrease an operational
planning budget.
Revenue
Budget predictions are impacted when actual revenue received is not as much as
originally anticipated. External factors negatively affecting assumed revenue might
include an economic downturn, unexpected competition causing lowered sales or an
inability to sustain the level of growth needed. Internal factors such as inadequate
collections and poor accounts receivable practices could also impact revenue.
Aggressive projections that assume a high rate of growth or increased revenue have a
much greater potential for inaccuracy than conservative estimates based on data
from previous years.
Expenditure
Expenditure may be one of the most difcult areas of the budget to predict.
Increases to health insurance, turnover levels and collective bargaining in unionized
organizations can all change salary and benefts by a signifcant margin. In many
industries, salary and benefts is more than 50 percent of the organization’s total
expenses. Any variance to employee compensation will have a noticeable impact on
budget predictions. Other unanticipated expenditures may include rent increases, a
previously unforeseen need for overtime and fnancial audit fees and fnes.
Market Conditions
The economy and current market conditions can impact the fnancial forecast in
several ways. Changes to the inflation rate and stock market conditions directly affect
the organization’s net worth and its ability to generate funds or loans. If the company
relies heavily on investments as a funding vehicle, then poor stock market
performance will have a direct, negative effect on budget predictions. Likewise, if the
rate of return on investments outperforms the prediction, then the budget will have a
surplus.
Legislative Changes
Certain legislative changes have a direct impact on budget projections. In most
cases, businesses will be aware of pending legislation before it takes effect and can
plan accordingly. Sometimes, just the introduction of future legislation, even if it has
not taken effect, will disrupt current budget projections.