Budget and Account Management of Restaurant | Case Study

Budget and Account Management of Restaurant Case StudyTraditions LtdQuestion One.Marginal costing, relation between Traditions Ltd Marginal costing for each(prenominal) discussion sections and without the eating place departmentWithout the restaurant, the stack away is profit satisfactory. The investment attach to is capable of do a profit of 9,000. This indicates that the restaurant department is making losses. Even without putting the fixed cost incurred by the line of merchandise into consideration, the restaurant had made a contribution of -30,500 in that particular period alone. This is a highschool level of loss to be incurred by only one department. Among the other threesome departments, furnishing is the least profitable. This is because the amount of purchase for resale that ends up being sold is truly low. This increases the mental strain in the workshop such that closing stock for the furnishing department is very high as compared to the other department. By the end of the period, closing stock is more than the opening stock. This indicates that there were fewer sales made in this department during that particular period.Question two.Financial and non- pecuniary consequences of closing down the restaurant departmentFollowing the financial position of traditions Ltd analyzed in the previous sector, the restaurant department was making losses. This has prompted the focus of the store to consider closing down the restaurant department. Doing so, traditions restaurant is allow be faced with various implications, both financial and non financial.Closing down the restaurant department leave layabout lead to reduction in the overall profits realized. This is because the contribution molding will increase leading to reduction in profits. This is because fixed cost will be shared among three departments. Since fixed costs per period of time do not vary by the amount of units produced, the other three departments will have to incur these cos ts. This will increase the overall costs leading to reduced profits. As indicated in the calculations of marginal costing statement, when the melodic phrase is operating four departments, the total contribution margin was 390,500. On closing down the restaurant, the total contribution increased from 390,500 to 421,000. This means that a higher contribution margin is to be shared between be departments.Another financial implication of closing down the restaurant is that the store will be required to retrench workers. The business will have to have a bun in the oven employees in the restaurant department such as Claude. This will have a negative financial effect on the business. Socially, when a business retrenches workers, customers do not like to be associated with it. In this context, Claude is a renowned chef especially after winning the potato-sculpting competition. This made him famous as he created customer loyalty. many an(prenominal) customers visit the store because of h im. Closing down the restaurant will reduce customers who also shop in other departments. This will lead to a even off of sales in the other three departments. Reduction of sales will lead to reduction of overall profits in the business (Tennent, 2008).Another financial effect of closing down the restaurant will lead to low selling of the restaurant assets. As indicated, the restaurant has been having challenges regarding its assets such as the dough mixer. due to poor maintenance of these equipments, they may be valued very poorly. This will limit the store in recovering some of the costs.Other than financial implications, the store will also face non-financial challenges as a result of closing down the restaurant department. One of the main challenges is bad image of the business which will be brought about by retrenchment of employees. Potential customers dislike businesses which often lay of their employees because terminating employees employment suggest that the business is no longer profitable. much so, society does not like business entities that lay off employee because unemployment is viewed as bad. These employees have families and other responsibilities to take care of, without their jobs, they cannot. As such, it is viewed as the fault of the store that these families will suffer. Potential customers will not like to be associated with such businesses (Drury, 2006).Question ThreeAs vigilance accountant, Samantha will be required to prepare, represent up and analyze financial information for the store. This will be very difficult since she does not have prior experience in counseling accounting. much so, the company does not keep well organized information data base. in that respect is no previous history of management information in the company and as such, she has to first of all collect her own management information. This is rather a very tedious. In her role, she will have the responsibility to ensure that the management of the store has to make decisions which are well informed from now going forward so as to guarantee the stores future profitability, stableness as well as its growth.Samantha will have to come up and maintain management information systems as well as financial policies by liaising with the management to provide a separate support service on all aspects of finance. As indicated, Samantha and some of the management colleagues such as Albert often argue. much so, the top management colleagues are old and will not for sure understand fully these financial policies so as to make sound management decision regarding the company.Her role also implicates looking into the future. She is supposes to analyze the performance of the business in the past eld and offer advice to the management on how to prevent challenges that the business come ups. Currently, the restaurant department is making losses and as such, it is her responsibility to advice the management whether to close down the restaurant or t o put more capital in it so as to make it more profitable as Claude advices. She will be required to make Traditions Ltd adapt to changing environment. The management of the store prides itself on running the store through maintaining the standards of services and customers relationships which is mainly related with a bygone era. This means that the store cannot be able to attract the young diaphragm class people who provide a very significant market. It is her duty to make sure that the store taps in this market so as to increase sales. She should advice the management on adoption new and upcoming trends so that they can be able to make decisions which will inline the store to new trends wherefore attract more customers.It is her duty to identify departments that need reduction in consummational and production costs. Most importantly she should be able to establish better and useful strategies so as to control spending. This will involve reducing the spending habits of some dep artment and increasing others. Each department is headed by a family member and in reference to their relationships some of the managers of departments such as Albert will not be willing to reduce their spending habits to increase other departments. Since is a family owned business, sibling rivalry will be unavoidable bringing about more challenges and disagreements among decision makers.Management training System (MIS) for Traditions LtdManagement information system (MIS) is vital in its role as an agent of sharing information within a business. There are various factors to consider patch implementing a management information system at Traditions Ltd (Graham, 2005) (Clarke, 2010).These factors includeThe level of knowledge of the users. Traditions Ltd is a family owned store. The managers of the store are above fifty years of age and most of them have little or no knowledge of what management information system is. These managers also do not have siblings to act on their behalf. They are required to access the MIS and effectively use it on daily basis. As such, the management information system that can be effective in the store should be easy to use for the management and simple to understand (Khosrowpour, 1997).The security of the system. A secure MIS should be implemented in the store. Since the store is family owned, there may be conflicting interest within the family. A management system should be in such a way that it is coherent and each member with access should be able to view what others are doing (Galletta Zhang, 2006).Stock control systemsStock taking is a process that requires the making a list of stock with their location and value. A stock control system must be able to show make orders, track stock levels as well as issue stock. The systems should contain information on the value, location, description, reorder levels, quantities, supplies and information on previous stock history (Office, 2009).Inventory overthrow is a ratio that describ es how many times a business inventory is sold and replaced over a period of time. To calculate the inventory turnover days, the days in the period are divided by the inventory turnover formula. Inventory turnover ratio is a key measure for determining the efficiency of the business in management of company inventory as well as making sales from it (Wanjialin, 2004).It can be calculated asInventory turnover =cost of goods sold/ average inventory. Or=sales/inventoryDay sales Inventory is simply the inverse of the inventory turnover ratio multiply by 365. i.e.Days Inventory= (Average Inventory/Cost of good) *365Question 4Budgetary planning and control systemBudgetary planning is the process by which a budget is prepared in an organization. A budget is a plan which is expressed quantitatively for a specific period of time. It can include various items such as assets, liabilities, planned sales output and revenues, amount of resources, cash flows and costs and expenses. As a management accountant at Traditions Ltd, budgetary planning is vital in the operations of the store. This is a process that will involve identifying objectives, looking for alternatives and collecting information about them and choosing the best alternative that suits the store. The final exam step is to implement the chosen alternatives to achieve the set objectives. In planning the budget, one needs to make sure that the plans are properly quantified, financed and be able to control resource allocation and performance (Plumptre, 1988) (Bogsnes, 2009).The main functions of the management accountant involve forecasting. This is where I am supposed to lay down objective to be achieved at the end of a specific period. Come up with a plan on how these forecasted objectives are going to be realized. Communicate this plan to all members of the departments in details so that they can follow the plan comprehensively. Coordinate various departments by keeping an eye on what is happening within the ope ration of the store. Select a team of managers and supervisors who are going to monitor every day activities in the store and make reports. Come up with authorization protocol where every employee should be able to follow. To boost morale and encourage employees, motivate employees either through giving rewards for best performers or promotions. Evaluate on mending basis the performance of the store to know whether the store is in line in realizing of the set objective (Radev Allen, 2006).Some of the behavioural problems one might encounter as a management accountant are the unwillingness of some management colleagues as well as other employees in the implementation of the plan. Since this is a family business, and each department is headed by a family member, some of them may be unwilling to cooperate especially when it comes to financing. This might result in mistrust, leaving behind some aspects of the plan which will lead to under realization of the objective. Budgets are tim e consuming and tiresome. As such, a management accountant should be sterilize to work long hours without pay so as to meet deadlines (Lacey, 2013).The best way to gain budget control in the businesses is through the analysis of variance. There are two types of variance analysis. One is the fixed analysis which does not change with the level of activities within the business. The other one is the flexed analysis which is prepared in such a way that it can be altered to indicate the actual activity involved. A flexed variance analysis will suit Traditions Ltd. This is because the management accountant should be able to monitor each and every activity that is taking place in the store.Actual profits= budgeted profits+ favourable variances wayward variances.For budgetary control to be effective, serious attitudes should be emphasized. There should be clear boundaries between managerial duties and other duties undertaken by employees. Budget targets which are contend should be ident ified and more emphasis put on them. Routines for data collection, analysis and reporting should be established. Reports should be aimed at respective managers and reporting periods should be fairly short. Time variance reports should be prepared and where they are adverse, action should be taken to get back to favourable (Business The Ultimate Resource, 2003).ReferencesBogsnes, B. (2009). Implementing Beyond budgeting Unlocking the doing Potential. Hoboken John Wiley Sons.Business The Ultimate Resource. (2003). Beijing Citic Publishing House.Clarke, S. (2010). Computational Advancements in end-user Technologies Emerging Models and Frameworks. Hershey Information Science Reference.Drury, C. (2006). Cost and Management Accounting An Introduction. London Thomson.Galletta, D., Zhang, P. (2006). Human-Computer interaction and Management Information Systems Applications. Armonk M. E. Sharpe.Graham, G. (2005). Exploring Supply Chain Management in the Creative Industries. Bradfo rd, England Emerald Group Pub.Khosrowpour, M. (1997). Managing Information Technology Resources and Applications in the World Economy Proceedings of the 1997 Information Resources Management Association International Conference Vancouver, B.C., Canada. London Idea Group.Lacey, D. (2013). Managing the Human Factor in Information Security How to Win Over Staff and find Business Managers. Hoboken Wiley.Office, G. B. (2009). The National Offender Management Information System Report. London TSO.Plumptre, T. W. (1988). Beyond the Bottom Line Management in Government. Halifax Institute for Research on Public Policy.Radev, D., Allen, R. (2006). Managing and Controlling Extrabudgetary Funds. Washington International Monetary Fund.Tennent, J. (2008). Guide to Financial Management. London Profile Books.Wanjialin, G. (2004). An International Dictionary of Accounting receipts 12000 + Entries on Accounting, Auditing Taxation in the USA, Canada, UK Australia Clear one Sentence Defi nition Right to the Point. New York iUniverse Publ .