They could involve numbers of customers to be served, number of rooms to be occupied, number of employees required, or some other unit, as opposed to pesos.. In the short run, room reven
Trang 1OPERATIONS BUDGETING
I Questions
1 Budgeting is planning In order to make meaningful decisions about the future,
a manager must look ahead One way to look ahead is to prepare budgets or forecasts A forecast may be very simple For a restaurant owner/operator, the budget may be no more than looking ahead to tomorrow, estimating how many customers will eat in the restaurant, and purchasing food and supplies to accommodate this need On the other hand, in a large organization a budget may entail forecasts up to five years (such as for furniture and equipment purchases),
as well as requiring day-to-day budgets (such as staff scheduling) Budgets are not necessarily always expressed in monetary terms They could involve numbers of customers to be served, number of rooms to be occupied, number of employees required, or some other unit, as opposed to pesos
2 Refer to page 225
3 a Hotel departmental budget – Rooms Department Budget
b Capital budget for a restaurant – Quarterly Cash Budget for a Restaurant
4 The other three steps in the budgeting cycle are:
3 Comparing actual results with those planned, and analyzing the differences (variances)
4 As a result of step 3, taking corrective action, if required
5 Improving the effectiveness of budgeting
Three possible limiting factors to consider in preparing a budget for a hotel or restaurant are:
a Limitation on sales revenue A hotel cannot achieve more than a 100% room occupancy In the short run, room revenue (if a hotel were full every night) can only be increased by increasing room rates But since very few hotels do run at 100% occupancy year-round, it would be unwise, desirable
as it might be, to use 100% as the budgeted occupancy on an annual basis Similarly, a restaurant is limited to a specific number of seats If it is running at capacity, sales revenue can only be increased, again in the short run, by increasing meal prices or increasing seat turnover (seat occupancy) But, again, there is a limit to increasing meal prices (customer resistance and competition often dictate upper pricing levels), and if seat turnover is
Trang 2increased by giving customers rushed service, the end result may be declining sales
b Lack of skilled labor or skilled supervisory personnel Increased productivity (serving more customers per waiter) would be desirable and would decrease our payroll cost per customer, but well-trained employees,
or employees who could be trained, are often not available Similarly, supervisory personnel who could train others are not always available
c Supply and demand Customer demand and competition must always be kept in mind when budgeting In the short run there is usually only so much business to go around Adding more rooms to a hotel does not automatically increase the demand for rooms in the area It takes time for demand to catch up with supply, and new hotels or an additional block of rooms to an existing hotel will usually operate at a lower occupancy than normal until demand increases A new restaurant or additional facilities to
an existing restaurant must compete for its share of business
5 Questions that could be asked to explain the P2,000 unfavorable variance between actual and budgeted revenue:
a Was there a general reduction in selling prices of drinks and appetizers?
b Was there a decrease or increase in the expected volume of sales?
c Was there a change in the sales mix or product combination?
6 The factors to be considered in projecting the revenue for the coffee shop breakfast period in a hotel are
a Percentage of registered guests taking breakfast at the hotel
b Experience about customers taking breakfast in the hotel who are not hotel guests
c Prices of the food served
7 A pro-forma income statement known also as budgeted income statement shows the projected of revenues, costs and expenses and expected result of operations (income or loss) for a future period of time
II Practical Exercises and Problems
A EXERCISES
EXERCISE 1
Sales revenue
100 x 2.25 x 312 P120 =
Sales revenue 70,200 P120 =
Sales revenue = P8,424,000
Trang 3EXERCISE 2
EXERCISE 3
Variable cost (P60 x 10,220) 613,200
EXERCISE 4
Turnover Average Check Seats Days Sales
Total sales revenue P9,198,000
EXERCISE 5
Occupancy Room Rate Rooms Days Sales
Total room revenue P3,633,120
Sales revenue
70 x 80% x 30 P340 =
Sales revenue 1,680 P340 =
Sales revenue = P571,200
No of rooms
40 x 365 70%
=
No of rooms 14,600
70%
=
No of rooms = 10,220
Sales revenue
40 x 70% x 365 P320
=
Sales revenue 10,220
P320
=
Sales revenue = P3,270,400
x x x
x x x
x x x
=
=
=
x x x
x x x
x x x
=
=
=
=
=
=
=
Trang 4EXERCISE 6
B PROBLEMS
PROBLEM 1
Sales (80 x 70% x 365 x P440) P8,993,600 Variable costs [P80 x (80 x 70% x 365)] (1,635,200)
PROBLEM 2
Turnover Average Check Seats Days Sales
P1,400,425.00
PROBLEM 3
80% x 150 = P120 x 3 = 360 guests
360 x 95% = 342 persons eat breakfast
360 x 25% = 90 persons eat lunch
360 x 75% = 270 persons eat dinner
Average meal prices Guests Days Sales
P1,684,800.00
x x x
x x x
x x x
=
=
=
Trang 5PROBLEM 4
120 seats – 305 days – Monday to Saturday – Lunch and Dinner
60 days – Sunday and holiday – Dinner only
Food
Beverage
Private Party Room (40% x P1,440,000) 576,000
Cost of Sales
Beverage cost (33% x P2,162,153) 713,510
4,760,848
Payroll and related costs
Variable wage cost (15% x P9,498,750) 1,424,813
Employee benefits (12% x P4,264,813) 511,778 4,776,591 Other operating costs
China, glass, silver, linen
Laundry
Supplies
Menus and beverages
Advertising
Repairs & maintenance
Total variable operating costs (11% x P13,100,903) 1,441,099 Fixed operating overhead costs
Administration and general P 24,000
Equipment depreciation 73,400 202,400
Trang 6* Schedule A
Seat Turnover Average Check Seats Days Sales
Weekday lunch 1.50 P 55.00 120 305 P3,019,500.00
Sunday and
holiday dinner 2.00 110.00 120 60 1,584,000.00
P9,498,750.00
PROBLEM 5
Requirement (a)
Budgeted Income Statement Room sales (80 x 75% x 365 days x P220) P4,818,000 Room Payroll and related benefits
Housekeeping (80 x 75% x 365 days x P45 x ½) 492,750
Linen, laundry, etc (80 x 75% x 365 days x P25) 547,500
Food Sales
Breakfast (21,900 x 2 x 80% x P20) 700,800
1,704,550 Direct operating costs – bar (75% x 1,704,550) 1,278,413
Requirement (b)
1 Revenue
Revenue – actual (21,700 x P221) P4,795,700
x x x
x x x
x x x
=
=
=
Trang 7Analysis: Revenue Variance
Quantity variance
Budgeted rooms (80 x 75% x 365 days) 21,900
Multiply by: Budgeted room rate P 220
Unfavorable quantity variance P44,000 Price variance
Multiply by: Actual rooms occupied 21,700
2 Housekeeping wages
Analysis:
Quantity variance
Actual rooms occupied & cleaned 21,700
Budgeted rooms occupied & cleaned 21,900
Multiply by: (P45 x ½ hr.) P 22.50
Favorable quantity variance P 4,500 Cost variance
Multiply by: Actual rooms occupied and cleaned 21,700
Unfavorable cost variance 10,850
499,100 21,700
Trang 8PROBLEM 6
Requirement (a)
Budgeted Income Statement
Other operating costs (5% x P350,000) 17,500
Other operating costs (10% x P150,000) 15,000
Total operated departmental income P267,500
Undistributed operating expenses
Property operation and maintenance 16,700
Income after undistributed operating expenses P202,800
Depreciation
Furniture and equipment 24,800 75,000
P114,800
Trang 9Requirement (b)
Cash Flows
Cash flows from operations
163,000 Cash flows from investing activities
Purchase of new equipment (P30,000 – P5,400) (24,600) Cash flows from financing activities
(95,600)
PROBLEM 7
Requirement (a)
Budgeted Income Statement
Month
Food cost (30% of Sales) P14,400 P19,800 P25,200 Wages and salaries
Depreciation
China, glass & silverware 2,100 2,100 2,100
Trang 10Requirement (b)
Cash Budget
Month
Cash receipts
Credit sales (20% - n/30)
9,600 13,200
38,400 62,400 80,400 Cash disbursements before
partners’ withdrawal
Total disbursements 23,400 43,800 54,600
Cash balance, beginning 10,800 15,000 15,000
Partner’s allowable withdrawal P10,800 P18,600 P25,800
* Total cost of food P14,400
Less: Initial purchases 9,000
Additional purchases P 5,400
Requirement (c)
Balance Sheet End of Month Three Assets
Furniture and Equipment
Less: Accumulated depreciation 9,000 171,000 China, glass & silverware
Less: Accumulated depreciation 6,300 18,900
Liabilities and Capital
Trang 11Add: Net income for three months 43,500 P268,500