Variance Report Manage budgets and financial plans

The budget is basically a measurement and setting of parameters that works according to the designed parameters and the measurement. The budget provides a guideline to the organization operations, and activities of the managers are provided through the variance reports. In the present work, based on the provided scenarios the financial management approaches are used to manage the resources effectively and efficiently through the main ingredients.

The main requirement is the classification of the budget plans and negotiation with the changes provided by the managers. The budget analysis provides risk identification, and contingency plan is designed to minimize and prevent the risk. The previously provided budget neglects some essential requirements, but still it is not achievable. The present variance report identifies the gap and provides some way to overcome. The basic accounting principles are used for the identification of the changes and negotiate with the manager. The organizational requirement is financial management, policies, procedures, and budget reports. For preparing the budget to meet a large scale, techniques and principles are needed.

The Budgeted gross profit is $(3100000-77500-200000-400000 = $ 242250). The expenses are constant and remained the same at $ 1401500 while the tax and the net profit before the interest was . The analysis defines that projected budget is defined accurately and the target of $ 1,000 000 can be achieved. The budget provides more than the target of the company. The cost allocation is required to define the needs and the importance of the sales volume according to the budgets. The equal cost is defined in the cost distribution. The cost allocation process distributes the cost of production and the actual consumptions for the production and the services. the expenses are used for the preparation of production and allocable cost.

The variance analysis provides information about the planned and actual activity. The variance analysis indicates a decline in the sales of the business by 6.45% for the present year. The sales volume changes defined decline in the direct cost of the sales by 5%. The commission on the sales was not determined properly, and the variance report has shown decline of 6.45. The reduction in wages was 0%, and it can be said that wages were planned accurately. The 10% reduction in the travel was defended for the short-term contracts that have no significant impact on the business. The decrease in the sales was 20% for the gross profit, and decline rate was less as 17.95%. The decrease in the general, as well as administrative expenses, is 50% that provides advantage to the business. The substantial increase in the employee expense involved the time wastage and distracted the contracted employees in the company. The predefined objectives of the incentive programs and the training programs are not achieved, and less variation in the marketing cost is observed, and fixed cost of advertisement expenses are determined (Yang, Northcott, & Sinclair, 2017). The cost of occupancy increased but required less attention for the employees due to reduction in the cost of the raw materials, water, paper, wastage, and electricity consumption. The lack of participation of employees in the budget-making process results in dissatisfaction with employee. The decrease in the net profit is 45%, and the projected profits can be decreased by 10%. The managers are required to consider effective measures to reduce the cost and to improve efficiency.

 Referring to the spreadsheet, commission, direct wages fixed, and sales are the revenue sources of the company. The actual commissions are less than forecasted commissions, i.e., 72,500 and 77,500, respectively, while actual direct wages fixed are the same as forecasted direct fixed wages, i.e., 200,000. In employment expenses, the only variation is observed in staff amenities where actual amount is higher than projected amount, i.e., 23000 and 20000 respectively while actual and forecasted superannuation and wages & salaries are same, i.e., 500, 000 and 500,000 respectively. Also, there is a minor difference in actual sales and forecasted sales, i.e., 2,900,000 and 3,100,000 respectively. On the other hand, the actual travel expenses are higher than forecasted travel expenses, i.e., 22,000 and 20,000 respectively, interestingly actual legal fee is 4,500 that is less than forecasted amount, i.e., 5,000, and similarly actual repair and maintenance expenses and office supplies expenses are 45,000 and 4,000 respectively that is less than forecasted amount, i.e., 50,000 and 5,000 respectively. Contrary, actual advertising expenses are much higher than forecasted expenses, i.e., 208,000 and 200,000 respectively. Last but not least, there is high variation in actual net profit after tax and forecasted net profit after tax, i.e., 618,750 and 765,750 respectively.

Modified contingency plan

Modified implementation plan

Procedure of Manage budgets and financial plans

In order to update the plan and to improve the training models, there are some important components that must be considered, including goals, options and obstacles, reward programs, and the current reality.

References of Manage budgets and financial plans

Yang, C., Northcott, D., & Sinclair, R. (2017). The accountability information needs of key charity funders. Public Money & Management , 37 (03), 173-180.

Kung, F. H., Huang, C. L., & Cheng, C. L. (2013). An examination of the relationships among budget emphasis, budget planning models, and performance. Management Decision , 51 (01), 120-140.

Macinati, M. S., & Rizzo, M. G. (2014). budget goal commitment, clinical managers’ use of budget information, and performance. Health policy , 117 (02), 228-238.