ASSIGNMENT:
PART A Case Study Analysis on Budget Variance
|
ITEM
|
July
|
August
|
|
|
Budget
|
Actual
|
Variance
|
Budget
|
Actual
|
Variance
|
|
Sales Revenue
|
230,000
|
225,000
|
-5,000
|
230,000
|
228,000
|
-2,000
|
|
Food Costs
|
85,000
|
87,000
|
+2,000
|
85,000
|
86,000
|
+1,000
|
|
Beverage Costs
|
14,000
|
15,000
|
+1,000
|
15,000
|
15,000
|
0
|
|
Labour Costs
|
77,000
|
82,000
|
+5,000
|
78,000
|
82,000
|
+4,000
|
|
Fixed Costs
|
35,000
|
35,000
|
0
|
35,000
|
35,000
|
0
|
|
Total Costs
|
211,000
|
219,000
|
+8,000
|
213,000
|
218,000
|
+5,000
|
|
Profit
|
19,000
|
6,000
|
-13,000
|
17,000
|
10,000
|
-7,000
|
PART B Answer the following questions.
Questions:
1. Explain the importance to the owners of monitoring budgets and why do you think it will help them to manage their finances better for the business.
- Monitoring budget is important to determine the cash flow, hence profit or loss. For example, above the table of July loss $13,000.00 and August loss $7,000.00. This requires the owners to provide funding off $13,000.00 in July and $7,000.00 in August to balance the books.
Insolvent trading is against the law.
2. Explain to them the use of analysing the monthly budget and comparing the forecasted budget against the actual budgets.
- Analysing the monthly budget and forecasting the budget costs against the actual budgets Shows, the above the case, that the business, while losing money has improved its position in reducing its variable costs i.e., Food/ Beverage/Labour, whilst increasing its sales revenue, still below budgets in August.
3. Explain your findings and possible reasons for these variances.
- A budget variance is the difference between the budgeted or baseline amount of expense or revenue, and the actual amount. The budget variance is favourable when the actual revenue is higher than the budget or when the actual expense is less than the budget
4. Research and suggest what improvements do you think the owners can take to improve this situation?
- The owners need to research and make the lower the Food/Beverage/Labour costs and improve sales revenue e.g. Advertising/On-line Ads etc.
5. Which factors as a manager, you should take into consideration when preparing financial and statistical reports? (Minimum 5)
- Preparing financial and statistical reports in the role as a manager, requires you to provide and document Daily/Weekly/Monthly/Yearly cost reports So that the owners have a profit/loss view off the business. Some budget lines will end up with a variance from the projected position in the final analysis; project delays, project blowouts, changes to staffing levels, changes in the currency exchange rate and so on can all affect the final balance sheet. Therefore, it is important to update forecasts regularly take into account changing circumstances.
Requires, Reports of actual financial performance, Revenue reports, Expense and output reports, Asset and cash management reports, Liability reports, etc.