Introduction. Budgeting Plays An Important Role In An Organization,

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Budgeting plays an important role in an organization, it help leaders in the organization make plans and perform according to the desired budget and deviate from it as less as possible. In this paper the budget analysis is presented and the variance will be discussed. The outcome of increasing the marketing expenses in T & P Fashion, it has be decided that the management must pay attention to the variances and work towards its improvement.
The flexible budget is a type of budget where the budget adjusts itself on the basis of the volume of activity. Any deviation from the estimated budget is termed as the variance of the flexible budget that can be either favorable or unfavorable (Kaplan & Atkinson, 2015). Here is the …show more content…

Shop Assistants/ Favorable
Favorable variance in the shop assistants shows that the company has managed to decrease the extra labor charges that could lead to unnecessary reduction of profit. The shop assistants results have resulted in favorable variance due to reasons such as using efficient staffs thus reducing the need of more staffs or negotiating less wage for each staff (Braun, Tietz & Harrison, 2013).
Rent/ Unfavorable
The unfavorable variance in rent signifies that the rent expenses have gone beyond the estimation made by the budget organizer. This could have happened to an unexpected increase in the market prices of the rent or extra production leading to a need for extra place to store goods (Kaplan & Atkinson, 2015).
Effect of Increasing the Marketing Expenses by 5 percent
Increasing the marketing expenses would reduce the overall operating profit making it an operating loss. This loss would also affect the cash availability in the company due to which the management would not be able to get any bonus as there would be heavy cash crunch. It is advisable to the management to not spend extra amount on the marketing.
Conclusion and recommendations
Preparation of flexible budget is very important for the management as it helps them to allocate the expenses. Further, if the actual expenses of the company deviate from the budgeted one, it would be

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