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Hospitality Industry Managerial Accounting HRT 374

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Examine alternatives before deciding. Standard of comparison ... International politics. Expense forecasts. Increases for food and beverage. Increases for labor ... – PowerPoint PPT presentation

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Title: Hospitality Industry Managerial Accounting HRT 374


1
Hospitality Industry Managerial AccountingHRT 374
  • Chapter 10
  • Operations Budgeting

2
Types of Budgets
  • Operations budget
  • Revenue
  • Expense
  • Cash budget
  • Capital expenditure budget

3
Budgeting Horizons
  • Annual
  • Divided into monthly
  • Divided into weekly
  • Divided into daily
  • 13/4 week segments
  • Five year plan
  • Long Range planning is Strategic planning

4
Reasons for Budgeting
  • Examine alternatives before deciding
  • Standard of comparison
  • Look forward
  • Involve all levels of management
  • Gotta have a plan. Plans can change, but you
    gotta have a plan.

5
Personnel Responsible
  • Board of Directors
  • CEO
  • Controller
  • Operating managers

6
Preparation Process
  • Financial objectives
  • Revenue forecasts
  • Expense forecasts

7
Financial objectives
  • Profit maximization
  • Quality service
  • ???

8
Revenue forecasts
  • Expected inflation
  • Pass costs to customers
  • Competition
  • Guest spending
  • Business travel trends
  • Tourist travel trends
  • International politics

9
Expense forecasts
  • Increases for food and beverage
  • Increases for labor
  • Changes in fixed charges
  • Page 454budget formulation illustrated
  • Flexible budgets page 460

10
Budgetary Control
  • Determination of variances
  • Determination of significant variances
  • Analysis of significant variances
  • Determination of problems
  • Action to correct problems

11
Determination of Variances
  • Page 465
  • Budget Actual
  • Significant variancesvaries.

12
Turn to page 463
  • What are premium wages?
  • How is Labor compared to the budget?
  • Any concerns with labor?
  • Total other expenses?
  • What are the problem areas in other expenses?
  • Is Department profit good or bad?

13
RevenueVariance Analysis (pages 468-469)
  • Price variance
  • Volume X (Actual price Budgeted price)
  • Volume variance
  • Budgeted price X (Actual volume Budgeted
    volume)
  • Price-Volume variance
  • (Actual price Budgeted price) X (Actual volume
    Budgeted volume)

14
Variance analysis p. 468
  • Room nts Avg price
    Total
  • Budget 400 20
    8,000
  • Actual 450 18
    8,100
  • Difference 50 2
    100
  • Price variance budget sales x (act pricebud
    price)
  • 400 x (18 20) --800 (U)
  • Volume variance bud price x (act vol bud vol)
  • 20 x (450 400) 1,000 (F)
  • Be aware negative or positive variance!

15
Management Action
  • What do you do if
  • You had a high labor variance?
  • You had a high food cost variance?
  • You had a high linen variance?

16
Reforecasting
  • What will happen over the next 11, 10, 9, 8, 7,
    6, 5, 4, 3, 2, 1 month(s)?

17
Budgeting for Multi-Unit Enterprises
  • Use bottom-up approach-starts with unit manager
  • Use top-down approach-less take this approach
  • Greater need for coordination
  • Greater volume of info
  • More sophisticated and computerized
  • Great amount of time
  • Allocation of costs
  • Management attention

18
Key terms
  • Page 489

19
Homework Ch. 10
  • Problems 1,2,5

20
Problem 1
  • Breakfast
  • M-F 5 x 52 x1.2 x 4.50 x 150 210,600
  • Sat 52 x 0.8 x 3.70 x 150 23,088
  • Lunch
  • M-F 5 x 52 x 1 7.20 x 150 280,800
  • Sat 52 x 0.5 x 6.70 x150 26,130
  • Dinner
  • M-F 5 x 52 x 0.5 9.80 x 150 191,100
  • Sat 52 x 1.5 x 11.45 x 150 133,965
  • Restaurant sales 865,683
  • Misc sales 25,970 Total Sales 891,653

21
Problem 2 step 1 lunch
  • Mon 4 x 150 x 1.2 x 6 4,320
  • Tue 4 x 150 x 1.2 x 6 4,320
  • Wed 4 x 150 x 1.2 x 6 4,320
  • Thur 4 x 150 x 1.2 x 6 4,320
  • Fri 5 x 150 x 1.2 x 6 5,400
  • Sat 5 x 150 x .8 x 6 3,600
  • Sun 5 x 150 x 2.0 x 6 9,000
  • Total Lunch sales 35,280

22
Step 2 Dinner
  • Mon 4 x 150 x .8 x 12 5,760
  • Tue 4 x 150 x .8 x 12 5,760
  • Wed 4 x 150 x .8 x 12 5,760
  • Thur 4 x 150 x .8 x 12 5,760
  • Fri 5 x 150 x .8 x 12 7,200
  • Sat 5 x 150 x 2.0 x 12 18,000
  • Sun 5 x 150 x 1.0 x 12 9,000
  • Total Dinner sales 57,240
  • L sales 35,280 D sales 57,240 92,520

23
Problem 5
  • 1. Budget variance actual budgeted
  • Meals Price Total
  • Budget 3,000 5.50 16,500
  • Actual 3,200 5.75 18,400
  • Budget variance 1,900
  • 2. Volume variance diff in meals (3200 3000)
    x budgeted price
  • Volume variance 200 x 5.50 1,100
  • 3. Price variance diff in price (5.75-5.50) x
    budgeted volume (meals)
  • Price variance 0.25 x 3,000 750
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