Analyzing Budget Variance and Ethics in Business

This assignment focuses on analyzing unfavorable budget variances, specifically examining those related to revenue. It explores three potential events that could justify these variances: changes in business conditions, service quality issues, and inadequate budgeting. Furthermore, it delves into the ethical ramifications of improper accounting, discussing its consequences for individuals, businesses, and reputations. The assignment concludes by proposing a method for improving budgeting accuracy in purchasing beverage stock.

FINANCIAL MANAGEMENT

Table of Contents
Assessment 2...................................................................................................................................2
Question 1....................................................................................................................................2
Question 2....................................................................................................................................3
Question 3....................................................................................................................................3
Question 4....................................................................................................................................4
Question 5....................................................................................................................................4
Question 6....................................................................................................................................5
References........................................................................................................................................7

ASSESSMENT 2
Question 1
(a) Projected profit in both the scenario:
Particular In case profit is invested in
redecorating the premises
In case a new wooden fire oven is
purchased.
New Sales $160000 +20% $160000+ ($150*12*15) (note 1)
$192000 $160000+27000
$187000
New Increased Profit $20000+32000 $20000+$(27000- (150*12*4.5))
$52000 $38900
Note 1
No. of pizza that would be sold in whole year = 150*12
Increase in sales revenue = 150*12*15
Net increase in revenue = (150*12*15) – cost relating to taking away pizza (150*12*4.5)
Thus from above analysis, it can be assessed that more profit can be earned in case the profit of
$20000 in invested in redecorating the premises. Hence, the same project will be chosen.
(b)
The management team of the company and the customers will be consulted before
making a decision between redecorating and purchasing equipment. As the choice of customer
plays a vital role in analyzing the present demand existing in the market. The marketing officer
who is part of the management of team also requires providing his point of view regarding
investment decision. Thus, after taking a market survey from existing and new customers that
whether they want pizza service to be provided to them or to enhance the interior of existing

premises; the decision regarding the investment will be taken. It is because; Profit increasing can
be a short term goal but not a long term objective.
(c) Records that are required to be maintained are:
 Proof of purchasing wooden fire oven.
 A copy of the agreement with contractor relating to redecorating of premises.
 Depreciation details: Original purchase agreement and cost relating to transportation
should be included in same.
 Bills or statement relating to expenses made particularly for redecorating premises.
Question 2
Monitoring and planning of the budget play a vital role in taking a decision relating to the
company because it assists in ascertaining the inefficient expenditures and further managing the
changes in the financial situation and achieve the financial goals. From budgeting company will
develop plans for costs and expenses by considering company’s funds. For this organization will
be able to manage sufficient money for the things which are needed and are important for them
on a priority basis. There are several benefits of budgeting like it will handle the money
efficiently, allow the sufficient recourses for projects, observe the performance of business etc.
Question 3
(a)
The first financial date is 1 July 2016, and last financial date is 30 June 2017 for the
restaurants operating in Australia
(b)
At the first financial date business can prepare goals and objectives in order to achieve
their targets. By considering the market situations, seeing the demand and opportunities, business
will do better planning and analysis. At the last financial date, a business can review its accounts,
and better forecasting can do (Smith, 2017). Thus business will be able to measure its
performance and can see where it is standing at the particular period of time. By seeing the
previous year, performance business can make efficient changes to the new one and is capable of
ignoring the mistakes made in that year.

Question 4
(a)
The financing account must be effective not only for reforming operations of the business
but also for the overall goals and objectives of business like assembling regulatory standards and
structuring of outer goodwill (Wada, 2017). It is essential to make a reduction in manual working
and to automate the task such as budgeting, making financial records and others covered in
financial planning. The Recording in excel can also save hours of business; young employees
also assist in bringing innovative ideas that may save the efforts and time of business.
(b)
I would recommend Xero accounting software in order to improve their current situation
(c)
There are many advantages of Xero it protects the data backup of the company; it
consists many levels of safety which involve standard data of industry inclusive of secured and
encrypted data centres. Xero is familiar with the daily financial updates of the business’s credit
card and bank account. As per the analysis of Wada, Obic Business Consultants , (2017) ,the
company will get clear daily outlines from a dashboard. With the help of dashboard, a company
will get to know how much money is credited and debited every day. Invoicing is not only used
in modifying but also it is an easy and quick process. It will just take some clicks, and the
invoice is made for the customers, and the company will also email that invoice to them (Cavico
and Mujtaba, 2017)
Question 5
(a) Calculation and Classification of variance for both the years
Financial Year Budgeted
Sales
Actual Sales Variance Type of variance
2007-08 $350000 $290000 $60000 Unfavourable Variance
2008-09 $400000 $250000 $15000 Unfavourable Variance

(b) Three different events that could justify these variances and relevant approaches that
could be applied in order to manage the deviation effectively:
For above scenario, the unfavourable variance can be specified as instances when actual revenue
is less than budgeted revenue. It can be said as an alert for the management that in appropriate
budgets have been presented by the ABC Pizza Plaza. The event which could justify this
variance is as follows:
 Change in business conditions: Change in business conditions comprise various
factors such as a change in the overall economy, due to which budget variance exists. It
could be possible that a new competitor has cropped which had created pricing pressure .
 The quality of service: It might be possible that customer is not satisfied with the
existing quality of service provided by ABC Pizza Plaza. It might be possible that
company is not able to continue providing quality service with an increase in sales.
 Lousy Budgeting: Error by budget preparer is also possible. The possibility exists that
budgeter has made wrong assumptions or prepared an unrealistically ambitious budget
which resulted in negative variances.
Question 6
(a)  Criminal Activities
Improper accounting in the business means that breaking of rules in order to benefit the business.
For instance: a poor ethics accountant has given more control, and few mistakes from managers
could misappropriate the business and hide the evidence (Hopkin, 2017). Personal Consequences
As per the view of Cameron and O'Leary (2015), Unethical accountants in order to commit crime
regarding their occupation are punished. Relying on the particular conditions of the case, this can
lead to penalties or prison, financing costs and official punishments to the offended accountants.
 Reputation of Business

This can also damage the reputation of company and loyalty of customers. The lack of trust can
give difficulty to business.
(b)
For improving the budgeting accuracy for the purchase of beverage stock a physical
inventory of main bar, service bar and store room areas must be conducted at the end of
financial year (Walther and Skousen 2014). Further, analyse the whole inventory and assess
the change in the level of inventory and its effect on the cost of beverage sales.

REFERENCES
Walther, L.M. and Skousen, C.J., 2014. Budgeting: Planning for Success. Bookboon.
Hopkin, P., 2017. Fundamentals of risk management: understanding, evaluating and
implementing effective risk management. Kogan Page Publishers.
Wada, S., Obic Business Consultants Co., Ltd., 2017. Display screen with graphical user
interface. U.S. Patent D788,143.
Smith, H., 2017. Xero for dummies. John Wiley & Sons.
Cavico, F.J. and Mujtaba, B.G., 2017. Wells Fargo's Fake Accounts Scandal and its Legal and
Ethical Implications for Management. SAM Advanced Management Journal, 82(2), p.4.
Cameron, R.A. and O'Leary, C., 2015. Improving ethical attitudes or simply teaching ethical
codes? The reality of accounting ethics education. Accounting Education, 24(4), pp.275-290.