Jet2 Task 2
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…
The transportation out variance was unfavorable as the standard output was 105,300 and the actual output was 107,569 as the variance is 2,269. This could be as a result in increased transportation expenses with the increased cost of fuel. The total variable cost is -115,053, which is favorable due to the company’s favorable variances aforementioned.
The contribution margin is unfavorable at -49,397 as this suggests the profitability of the company’s products. This is in a decline, due to the economic climate and suggests management take action. Research and development was favorable at -3,577 as well as total operating and expenses and the operating income is unfavorable at -45,920.
Budgets are prepared annually, corrective action is performed to detect if this will be an ongoing occurrence or if they are results from a onetime event. Management must prescribe strategies for expenses planned for upcoming months which could be scaled back to reduce unfavorable variances ongoing. A cost benefit analysis should be performed.
Corrective action for unfavorable variable net sales for Competition Bikes, Inc raised an investigation for the concern of the discrepancy. A specific percentage amount for variances both favorable or unfavorable holds