Manage Finances Within A Budget

Submitted by: Nico Antonio A. Serafin Submitted to: Ma’am Lorejen Salise
Based on the variance/diversion report of the TAFE Island Holiday Resort, me and my business partner have interpreted the figures listed in the report and have offered remedies to improve their budget performance.

This is their income report:

Income Actual Budget Variance
TAFE Restaurant $233,278 $205,000 $ 28,278
TAFE Bar $ 36,500 $ 51,300 $ (14,800)
Island Coffee Shop $ 14,000 $ 18,500 $ (4,500)
Room Service $ 1,840 $ 4,450 $ (2,610)
Total Income $285,618 $279,250 $ 6,368

Based on this report, we can tell that a certain area of the resort has exceeded the budget therefore having a variance of $28,278. Because of this the resort should be more considerable with their budgeting judgment. They should plan, organize their budget and even motivate their staff in making decisions well. They can also start making another budget plan in this section of the resort. They can use a zero budget system to clearly detect inflated budgets in the beginning of the financial year. The resort should control their budget by checking income and expenditure at regular intervals and identifying and reporting the deviations.

As for the other sections of their resort, there is no need for any change. It is because the incomes and the variances did not exceed their targeted budget. Therefore, they can save more if they continue. They only need to improve the budget and income of the TAFE Restaurant.

Included in the report is their expenses report:

Expenses Actual Budget Variance
COGS $102,000 $100,000 $ 2,000
Electricity $ 10,400 $ 10,300 $ 100
Repairs $ 5,700 $ 3,900 $ 1,800
Administration Costs $ 3,000 $ 2,250 $ 750
Wages – Catering $ 79,200 $ 82,000 $ (2,800)
Wages – Beverage $ 19,760 $ 20,000 $ (240)
Advertising $ 15,850 $ 18,600 $ (2,750)
Total Expenses $235,910 $237,050 $ (1,140)
Net Profit/(Loss) $ 49,708 $ 42,200 $ 7,508

In this section of the report, we can see that the COGS, Electricity, Repair, and Administration Costs are the ones that exceeded in budget and the Wages in Catering and Beverages and in Advertising did not.

In the Cost of Goods Sold area, the variance is $2,000. Here, they should rethink their strategy in their budget. They should make sure that their budget is enough to cover the actual expense of their products and have more budget in the next order.
In the Electricity section, they should consider using energy-saving materials for their resort. Not only they can save in electricity, they can also save in their income.
In concern with their repairs, they can save more buy using durable equipment and materials to reduce repair costs and should have maintenance every day to make sure that damages can be reduced, therefor reducing the cost of repairs.
Administration Costs, here the budget should be a little higher than $2,250. It should be at least $3,000 or more but not too high. Administration should be able to use the budget efficiently. Responsibility centers are recommended in this matter to further help the resort in budgetary controls.

Wages in Catering and Beverages have no need for improvement, it is in a good state and is with balance with income and expenses just make sure that the service is good enough to equal the wages to the staff.

In the Advertising section, the budget is ok and in the actual, you can use it in making new advertising strategies, here there in no further improvements in budget. Advertising is also important to attract future clients and customers so that the resort can earn more income because if the advertisement is convincing, then people will come to the establishment.

Overall, this report is well organized and is accurate for their variance/diversion report. In the future, this resort will still be in service if they continue to aim in excellence in service and in budgetary controls.