Jet2 Task 2 Essay

1902 WordsApr 11, 20138 Pages
Subject: Financial Statement Analysis – Task 2 Summary Report A budget, as defined by Hilton (2009 pg 348), is a detailed plan, expressed in quantitative terms that specifies how resources will be acquired and used during a specific period of time. A budget is a financial document utilized to project future income and expenses. A budget is based on how much you make in income and what your monthly expenses are. Budgets evaluate performances while the plan is what is going to happen or refine what you want to accomplish by thinking ahead. The purpose of having a budget is it improves efficiency, assigns responsibility, provides direction, and helps businesses plans and control finances. Managers use the budget as a…show more content…
In isolating the causes of variances, managers evaluate organizational performances. A price variance is favorable is the actual price is less than the standard. A quantity variance is favorable if the actual quantity used is less than the standard quantity allowed. Competition Bikes favorable and unfavorable variances are as follows: Revenue net sales standard output 5,247,450 – actual output 5,083,000 with a variance of -164,450, which is unfavorable. This is the amount of sales generated by Competition Bikes. The performance is poorer than budgeted performance. This should be a concern for the company as sales and other cost-driver activities were not the same as originally forecasted or revenue or variable costs per of activity and fixed costs per period were not as expected. This should raise areas for concerns. Units of goods for direct materials, direct labor, manufacturing overhead, and variable selling expenses all faired favorable variances and poses no concerns for the company as revenues are greater than budgeted. Corrective actions in these areas should be investigated, as employees may be performing tasks more efficiently and therefore managers can apply these efficiencies elsewhere in unfavorable variances. Advertising expenses were unfavorable as the standard output figure is 28,412 and the actual output was 31,250. The variance is 2,838 over budgeted. This is a

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