Financial Analysis

1315 Words6 Pages
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Budgeting|
RJET Task 2|

C.Smith-Barber4/16/2013|

A1. Budget Concerns
A fiscal document used to plan future revenue and expenditures is a called a budget (Murray, n.d.). The overall process of whether or not the company can continue to run with the projected revenue and expenditures is called budgeting (Murray, n.d.). It is valuable because it helps an organization consume the inadequate financials and human capital for which is best to achieve current business opportunities. A company is also capable of formulating both long-term and short-term strategies for help in implementation and constant assessment of its performance.
Competition Bikes (CB) has made a master budget for Year 9 after being on a roller coaster for
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Unfortunately, the operating income was unfavorable by -$38,478 because the costs were greater than the revenue and the unfavorable variance of the contribution margin.

A2a. Corrective Actions
Competition Bikes experienced some disapproving variances within Year 9 by exceeding or falling below the amount of what was budgeted. Transportation Out had an actual output of $108,297; the contract states that it charges $30/unit which can only mean two things: they were over charged in the amount of $31.64/unit or they produced about 3610 units but only sold 3423. Therefore, it is extremely important that the company abide by the budgeted amount of units and make sure that the contracted amount for each unit is being accounted. For advertising expenses, it went over by $3049 of what was forecasted. It is highly possible that CB underestimated its need for advertising considering the company is trying to comeback from an economic downfall; however, 2% of the gross margin was dedicated for this expense but much more was spent. There is sometimes a possibility that fluctuation will occur among variable costs, but it is important that management remain consistent and not deviate from the forecast or keep in mind the previous year’s budget. With the fixed expenses, administrative salaries and other general and admin expenses were unfavorable. The expenses that should either be

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