Budgetary Control

Budgeting

	Hotel	Dining Room	Conference Centre	Total
Capacity	100 rooms	100 seats	200 seats
Selling price/unit	£75	£35	£40
Material costs/unit	£5 laundry	£15 food	£5 refreshments
Other variable costs/unit	£5 cleaning	£10 labour	£1 light & heat

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.

16.2 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?

16.3 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?

Profit budget (in £'000)	Jan	Feb	Mar	Apr	May	Jun
Sales	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