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ACC 202: Final Project Part I Budget Variance Report SubmissionTania FarhatSouthern New Hampshire University
Peyton ApprovedOperating Budget and Variance analysis Report Quarter – July to SeptemberAn operating budget portrays a company’s expenses, expected costs, and estimated income,considering the quarterly or the annual performance. The challenging part of completing anoperating budget is to properly estimate the historical data and factor in the probability ofdifferent market variables. An operating budget must take into account historical salesperformance, current trends in the industry or the sector, seasonality, new products expected tobe launched and competitive forces. Often, firms create more than one operating budget aimingto anticipate a potential decline in revenues or a new product launch that could boostprofitability. An effective operating budget provides details on the price and the expected product volumeto estimate total sales. Therefore, a key component of this budget is sales, followed by variablecosts, fixed costs, interest, and depreciation. Costs include raw materials and finished goodsready for sale, salaries, wages, utilities, rent or mortgage, car maintenance and service, postage,cleaning, transportation costs, travel expenses, office supplies, marketing/advertising expenses,insurance, professional services and so on. Interest includes Interest on bank loans and/oroverdraft fees.Once the budget is complete, accountants prepare a summary to demonstrate their projections.Often, there is a column for actual costs in order to compare projections to actual revenues andexpenses. One of the objectives of budgeting is to provide a base against which actual results canbe compared. The budget must be realistic, as there is no point analyzing variances against anunrealistic budget.
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