Jet task2 Essay

857 WordsOct 15, 20134 Pages
JET Task 2 A1. Budgetary Items Of Concern Within the budget for Competition Bikes, Inc., there are a few different items of concern. Some items that raise a concern within the budget are the projected number of unit sales and the amounts budgeted for advertising and research and development. I think it is obvious in the previous years that the amount the company spends on advertising has a direct effect on the number of sales. According to the projected number of units that are expected to be sold, the company is expecting an increase from 3,400 in year 8 to 3510 in year 9. This is a considerable increase because of the fact that in year 7, there were 4,000 units sold, and in year 8 we saw this drop to 3,400. I think that if the…show more content…
This is due to the fact that actual unit sales were projected to be 3510 units, while actual sales were only 3423. While this is an unfavorable variance within the flexible budget, in reality, it is a positive thing because there was an improvement in sales from the prior year. The next four variances were favorable ones for the company. Direct materials, direct labor, manufacturing overhead, and variable selling expenses all had favorable variances. This is to be expected as the company sold fewer units than they had projected for. Competition should be spending less on variable expenses when they are producing less than expected. Overall, variable expenses as a whole saw a favorable variance by spending $ 88,989 less than expected. This is despite the fact that the variances within the advertising and transportation out categories were unfavorable. All of these variables accounted for show an unfavorable contribution margin variance of$ 41,076. This is due to the money lost in the unit sales and the few unfavorable variances. Overall, fixed general and administrative expenses experienced a favorable variance of $2,597. This is mainly due to favorable variances in the executive compensation, employment taxes, utilities and services, research and development, and other utilities and services expenses. In the end, Operating income had an unfavorable variance of $38,478. This is important to note because this number was

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