Operations Budgeting
Complete Review Questions 1-10 at the end of "Hospitality Industry Managerial Accounting," Ch. 10
Types of Budgets
Budgeting Horizons
Reasons for Budgeting
Personnel Responsible for Budget Preparation
The Budget Preparation Process
• Forecasting Revenue
• Estimating Expenses
• Projecting Fixed Charges and Interest Expense
• Budget Formulation Illustrated
• Flexible Budgets
• Budgeting for a New Lodging Property
Budgetary Control
Determination of Variances
Determination of Significant Variances
Variance Analysis
• Revenue Variance Analysis
• Cost of Goods Sold Analysis
• Variable Labor Variance Analysis
• Variance Analysis of Sands Motel's Significant Variances
Determination of Problems and Management Action
Reforecasting
• Reforecasting at The Sheraton Corporation
Budgeting at Multi-Unit Hospitality Enterprises
Budgeting at Lodging Properties
Competencies
1. Describe the purposes of budgeting for operations and identify the roles and responsibilities of those involved in the budgeting process. (pp. 453-456)
2. Explain the process of preparing an operations budget. (pp. 457-469)
3. Describe the budgeting control process and explain how significant variances are determined. (pp. 469-475)
4. Use information from budget reports to calculate and analyze several kinds of variances related to revenue, cost, volume, and labor. (pp. 475-485)
5. Describe the proper management response to the results of variance analysis. (p. 486)
Every Rational Manager plans for the future. Some plans are formal and others are informal. Budgets are formal plans reduced to dollars. Budgets provide answers to many questions, including the following:
1. What are the forecasted revenues for the month?
2. What is the budgeted labor for the year?
3. How many rooms are expected to be sold during any given month, and what is the expected average room rate?
4. What is the budgeted telecommunications department operating income for the month?
5. What is the estimated depreciation for the year?
6. How close were actual food and beverage revenues to the budgeted amounts for the month?
7. What is the projected net income for the year?