Answer To: SITXFIN003 Learners Assessment Guide SITXFIN003 Manage finances within a budget Assessment 1...
Sumit answered on Aug 31 2021
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Assessment 1 – Case Study 1 Analysis
Part A
Item
July
August
Budget
Actual
Variance
Budget
Actual
Variance
Sales
Revenue
265,000
263,000
-2000
265,000
266,000
+1000
Food Costs
87,000
88,000
-1000
87,000
88,500
-1500
Beverage
Costs
13,000
12,500
+500
13,000
14,000
-1000
Labor Costs
79,000
83,000
-4000
80,000
82,000
-2000
Fixed Costs
38,000
38,000
0
38,000
38,000
0
Total Costs
217000
221500
-4500
218000
222500
-4500
Profit
48000
41500
-6500
47000
43500
-3500
Analysis:
The major area of analysis is the Labor Costs. The Variance in case of labor costs in both the months (4000 adverse in the month of July and 2000 Adverse in the month of August) is the highest in comparison to the other factors. The owners and managers should see the reasons for such high labor variances. Some of the reasons might be increase in wage rate or hiring of more labor than anticipated or inefficiency of the labor.
The next area to monitor would be Foods Costs that have next highest variance after the labor costs. Food costs needs to be monitored constantly so that variances can be reduced. This variance is increasing on monthly basis (1000 adverse in the month of July and increased to 1500 adverse in the month of August). Some of the possible reasons for increased food costs could be high wastage of food or unrecorded sales because of which the variance is high.
The management should also check the Beverage Costs since the variance has increased from 500 favorable in the month of July to 1000 adverse in the month of August. The management should check this in dept because of the increased trend as per which the variance is increasing. The management should carefully analyze the changes that were made with respect to this variance because of which favorable variance changed to adverse in just one month.
Part B
1. Budgeting is the process by which standards are set in the beginning of a period for a specific
period specifying how much resources would be used by each unit of the company during the
period. The benefits of budgeting to the owners of the capital are:
(a). Budgeting helps the owners to monitor the expenses incurred by the company by comparing the budgeted expenditure with the actual expenditure. The process of comparing the budgeted expense with the actual expenses is also known as variance analysis.
(b). Budgeting helps to allocate resources as per the objective set by the owners so that the resources can be utilized efficiently and effectively towards achievement of objectives of the owners. Since the resources in every organization...