Martin, Barton and Fargo
Financial Performance Variance Analysis for year ended June 30th, 2011
1. The total revenue figure shows a favourable variance of $324,911; this is a result of an increase in revenue from ‘taxation preparation and lodgement’. It was budgeted that the business creation and taxation advice and consultation segments of the business would increase, bringing in more revenue for the business whilst preparation and lodgement was predicted to decrease. This could be because the business was hoping to move forward and away from tax returns.
In order to navigate away from such extensive variances in the future, budgets should be prepared on realistic figures, based on competition, past events and industry standards, rather than the businesses goals and opinions of the owners.
2. Total operating expenses showed an unfavourable variance of $695,241; this occurred due to either mismanaged expenses or poor budgeting estimates. The majority of expenses were more than budgeted. Wages and salaries provided the largest difference, this may have occurred when producing more revenue; it is possible more staff were needed and longer hours worked to generate the actual revenue.
To prevent such significant variances in expenses in the future several steps can be taken. The method of budgeting could be altered, so figures aren’t adjusted according to the previous year, but if by using a zero based budget all expenses must be suitably explained and sufficiently necessary. Also, managers may not be controlling their costs rigidly enough-this would explain many variances within the operating expenses report.
... Turn out during special hours APPENDIX B-2 MARKETING BUDGET Marketing Budget Expected Revenue $1, 735, 793. 95 Cost of Food Sold $ ... 00 Amount Expense Depreciation Amortization Amort. Lshld.Balance Sheet $ 1, 100, 000 2. 0 DESCRIPTION OF THE BUSINESS 2. 1 Business Description. Gilligans ... Cap tial... 3-5 2. 0 Description of the Business 2. 1 Business Description...6 2. 2 Mission Statement... 6 2. 3 ...
3. The net profit figure reveals an unfavourable variance of $370,330. This figure would be considerably higher if revenue hadn’t increased as such. Expenses were unacceptably higher and poorly budgeted for, resulting in a lower than expected and planned for net profit figure.
This can be remedied by, as stated previously, more care is taken when estimating for figures, and taking into account more information, such as competition figures, previous figures, market structure, expected market activity and achievable goals.