This assessment consists of 4 tasks. You must complete all the following tasks.
Task 1-Estimating occupancy rate
Task 2- Preparing annual profit & loss budget
Task 3 – Preparing profit & loss budget on quarterly basis
Task 4- Prepare cashflow budget
In order to achieve a satisfactory outcome in this assessment, you must satisfactorily complete all the observation skills listed in the marking guide.
Assessor will inform you the submission date for this assessment. It recommends allocating approximately 6 hours for this assessment.
Your assessor will provide you with the soft copies of the required templates for this assessment
You have owned an accommodation business for a few years, but only began to prepare operating and financial budgets for the business last year. Your actual figures for the previous year show that the business is not achieving the profits you forecasted and wish to achieve.
Your actual occupancy rate for the previous year was 70%. It’s time to start preparing budgets for the next financial year. You believe that, with an annual advertising and marketing campaign costing $60,000 (+GST), you can increase the overall occupancy rate to 75%.
List four internal factors you must consider when estimating next year’s occupancy rate
List four external factors you must consider when estimating next year’s occupancy rate
Task 2 – Prepare the annual profit & Loss budget
Task 2.1 Question and answer
1: Evaluate the impact of the different room rates and wage rises on the business. Explain your response,referring to the financial data, information, calculations or budget forecasts you have based your explanation on when necessary.
2: What specific information should you seek about your competitors prior to making any decisions?
3: What recommendations would you make to increase projected profit? Briefly list the benefits and challenges of your recommendation.
While showing your new budget to the business manager, you both realise that preparing an annual budget is inadequate for managerial planning and control purposes. The budget cycle should be adjusted to show quarterly and in some cases monthly progress against the budget.
4: Why do you think this change is necessary?
Task 3 – Prepare a profit & Loss budget on quarterly basis
Task 3.1: Question and answer
1: Do you believe the even distribution of all fixed costs across the four quarters is a reasonable or accurate assumption? Explain the reasoning for your response.
2: In light of the huge differences in profits between the busy summer months and the quiet winter months, outlineyour recommendations for improving the business’s profitability.
Task 4 – Prepare a cashflow budget
Task 4.1: Question and answer
- You could use word processing software to complete the task 4.1 & 4.2. Alternatively you could do the calculations manually however you must show the calculation steps.
Refer to the cash budget in Task 4. Your business arranges a short-term loan at the beginning of the winter quarter of $20,000 for three months (repayable in three months’ time with interest charged at 1% per month).
1: What would the total cash inflow be during the winter quarter?
2: Calculate the cash outflow for the quarter.
3: You’re considering opening a new division within the establishment to improve your service to customers. Write a list of the factors you need to consider when evaluating this proposal.
Task 4.2: Complete the contents in the report based on the following incident.
You receive the following email from a dissatisfied customer.
‘I rocked up late to your reception desk – tired and worn out from a long drive with three cranky kids in the car! Your receptionist offered me a $50 discount if I paid cash. Well of course I couldn’t pass up such a good opportunity, so I paid my $50.
But the next day when I checked out and asked for a receipt, she refused. I’m not impressed! That’s no way to run a business!’
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