Assignment -
Budgeting -
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Hotel
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Dining Room
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Conference Centre
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Total
|
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Capacity
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100 rooms
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100 seats
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200 seats
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|
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Selling price/unit
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£75
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£35
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£40
|
|
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Material costs/unit
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£5 laundry
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£15 food
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£5 refreshments
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|
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Other variable costs/unit
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£5 cleaning
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£10 labour
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£1 light & heat
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a. Produce a budget that shows the contribution for each of the three services. Rank the three services as to the greatest contributions to profitability. What are the constraints?
b. The marketing manager has asked your advice as to whether to accept EITHER 200 people attending a conference and staying for dinner in two sittings but with no hotel accommodation (which will make it very difficult to sell hotel rooms) OR to refuse the conference booking but to maintain the average 60% hotel occupancy, of which half use the dining room.
Jethro Turnbull Ltd is a privately owned business. It has budgeted for profits (after deducting depreciation of £35,000) of £125,000. Debtors are expected to increase by £20,000, inventory is planned to increase by £5,000 and creditors should increase by £8,000. Capital expenditure is planned of £50,000, income tax of £35,000 has to be paid and loan repayments are due totalling £25,000. What is the forecast cash position of Jethro Turnbull at the end of the budget year, assuming a current bank overdraft of £15,000?
Bridgeport PLC has produced the following summary profit budget and cash forecast for the next six months. What assumptions can you make about the business based on these figures? What questions would you want to ask in relation to the figures?
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Profit budget (in £'000)
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Jan
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Feb
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Mar
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Apr
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May
|
Jun
|
|
Sales
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1000
|
1000
|
1000
|
2000
|
2000
|
2000
|
|
Cost of sales
|
400
|
400
|
400
|
800
|
800
|
800
|
|
Gross profit
|
600
|
600
|
600
|
1200
|
1200
|
1200
|
|
Overheads
|
350
|
350
|
350
|
350
|
350
|
350
|
|
Net profit
|
250
|
250
|
250
|
850
|
850
|
850
|
|
|
|
|
|
|
|
|
Cash forecast (in £'000)
|
|
|
|
|
|
|
|
Net profit
|
250
|
250
|
250
|
850
|
850
|
850
|
|
Capital expenditure
|
-100
|
|
|
-250
|
|
|
|
Loan repayment
|
|
|
|
|
-400
|
|
|
Cash flow
|
150
|
250
|
250
|
600
|
450
|
850
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Budgetary Control -
Hunter-gatherer Ltd produces Widgets. The table below shows the budget and actual units sold together with standard costs and actual costs for materials and labour used in the manufacture of Widgets.
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Data for July 2008:
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Budget
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Actual
|
|
|
Units of finished Widgets sold
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5000
|
4500
|
|
Standard material required (kg per Widget)
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1.5
|
1.7
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Actual materials used
(kg per Widget)
|
|
Standard material costs per kg
|
£12.50
|
£13.00
|
Actual material cost per kg
|
|
Standard labour hours required
(hours per Widget)
|
1.2
|
1.3
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Actual labour hours used
(hours per Widget)
|
|
Standard labour costs per hour
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£14.00
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£13.90
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Actual labour cost per hour
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Assume that the quantity of materials purchased and the quantity used are identical.
a. Produce a report that compares the original budget with actual costs for materials and labour in July.
b. Produce a budget versus actual variance report using a flexible budget and calculate the variances on that basis.
c. Calculate both usage and price variances for each of materials and labour.
d. Explain why variance analysis using a flexible budget may be helpful for management control.