Budgeting and Variance Analysis in Twin River Cafe

This report discusses the objectives of budgeting, revenue and spending variance in Twin River Cafe for July, and the concerns regarding sales and expenses. It suggests implementing marketing strategies and operational management tools to support the objectives of the cafe.

FINANCE

EXECUTIVE SUMMARY
This report has highlighted budget used to provide proper structure and direction to
organization. After that the report has highlighted the spending and the revenue of the
organization. After that the report has highlighted that sales and expenses are some area of
concern for Twin river. In the end the report has highlighted that operational management tool
and marketing strategies can help the organization in overcoming the same.

Table of Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
Objective Of Preparing Budget....................................................................................................4
Twin River revenue and spending variance for July...................................................................5
Variance should be of concern to management...........................................................................6
Advise the Twin Rivers Café on what they need to do to support their objectives.....................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Budget is an estimation of revenue and expenses over a specified future period and is
usually compiled and re-evaluated on a periodic basis. This report has highlighted the objective
behind preparing the budget. After that the report goes on to highlights Twin River revenue and
spending variance for July. After that the report has highlighted variance need to be considered
by the management and the way through which organization can achieve the objective.
MAIN BODY
Objective Of Preparing Budget
Budget is a document which used to define the expected revenue and expenses over a
specific period. There are many key objectives behind preparation of budget in the organization,
as budget used to be supportive document for the variety of the activity which are performed in
the organization. Some key objective of preparing Budget are as follows:
Provide Structure: Budget will help twin River cafe in giving the idea toward the
operation of the business need to go in the organization. As budget will help Twin River in
making the different plans and policy in the organization (Slack and Brandon-Jones, 2018). As
All the policy and plan which are made in the organization are made by looking at the financial
position of the organization at all point of time.
Predict Cash Flows: As it is always difficult for the organization to predict the amount
of cash left with the company in during the operation of the different activity in the organization.
Budget will effectually help Twin River in predicting the cash flow in the organization and
estimating the cash which will be with the company. This result may be unreliable result as
predicting future is hard task but organization can take this as a basis for planning future.
Allocate Resources: This is the another important objective behind preparation of the
budget for twin River. Budget will eventually help the company in deciding where to allocate the
different funds to different activities in the organization. Bas budget will help the company in
knowing the expenditure of all the department and the revenue which is generated by all the
department (Jain and Bain, 2017). On the basis of the same the organization will be allocating
the different resources in the organization.
Measure performance: It is the another important objective behind preparation of the
budget in the organization. Generally with the help of the budget Twin River can judge the

performance of the employee in the organization. Generally, for this purpose organization uses a
variance of budget in the organization.
Twin River revenue and spending variance for July
After going through the company revenue and spending variance For July it can be said
that Budgeted meals quantity of the organization which was expected by the organization is not
adversely meet. As planned budget of Twin River was 18000 meal but there was adverse of 200
as actual result was only £17800 (Rahimi and Kozak, 2017). The result of the same is seen in the
revenue of the organization also as company has benchmarked the target of £81000 but due to
the adversity of planned meal it has impacted the revenue as there is adverse of £900 and actual
result is just £80100.

Going through the expenses side of the budget it has been interoperated that rent,
insurance and Fuel expenses of the organization is at adverse side for the organization. As Twin
River has planned £4300 for the rent expenses in the July but the actual expenses were £5100
which created adverse of £800 in the organization. Planned budget for the insurance element was
2300 but the actual result was £2600 which has created adverse of 300. Fuel expenses was
planned for 2480 but the actual result was £2490 and adverse was of 10. At the same time the
element like Raw material, wages & salary and Utilities are at favourable side as expected
budget for raw material was 43200 but the actual expense was £42720 which has created favour
of £480. Expected budget for Wages & salaries was £10600 but the actual expense was £10540
which has created favour of £60. Expected budget for Utilities was £3300 but the actual expense
was 3290 which has created favour of £10.
This sums up the expenses of Twin River at adverse of £560 as planned expenses were 66180
and actual expense were £66740 which created adverse of £560. Net operating income of the
organization is also at adverse of 1460 as expected budget was £14820 and actual was £13360.
Variance should be of concern to management
Inadequate forecast: It was one of the biggest concern which has to be looked by the
management of Twin River cafe. As organization was not able to fore caste properly at the time
of making up of budget. As organization has allotted a good amount of budget for the internal
resources of the organization such as raw material, wages and salary and Utilities of the
organization but it was found that excess amount was allocated to this element whereas external
expenses were not allotted a budget in the proper way as all the external expenses were adverse.
So the management of the organization has to make sure that they used to make sure that there is
an inadequate forecast of cash flow in the organization.
Sales: Another alarming concern for the management of Twin river is that the sales of the
organization. It is clearly analysed by the revenue and spending variance for July that the
organization need to make the corrective to action to improve the sales of the company
(Ruparathna, Hewage and Sadiq, 2017). As both meal quantity and Revenue of the company has
shown a big variance of £200 for the meal quantity and £900 for the revenue of the organization.
As revenue is generated by the sales of the company and the number of the meal quantity sales is
the sales of Twin River it can be said that the sales of the company is not at the positive side.

Expenses: It is the another big concern which need to looked by the management of
Twin river in the organization as the report shows that the total expenses of the company is to
high which is impacting the income of the company in the long run of the business. As the report
shows that total actual expenses of the company was 66740 which has seen 560 adverse as well.
This is really a huge amount of expense for the company whose revenue is just 80100. This is
eventually reducing the operating income of the company as operating income of the company is
13360 only (Ruparathna, Hewage and Sadiq, 2017). As explained in the above concern that there
is adequacy of sales for Twin River it is making worse for the Twin River.
Advise the Twin Rivers Café on what they need to do to support their objectives
Marketing strategy: Twin River has to make sure that they used to invest very heavily
on the marketing activity of the organization to promote the product of the company in the
nation. As marketing strategy will help the company in improving the sales of the company. As
marketing strategy will help the company in promoting awareness in the people of nation about
the different sort of the facility and services which is offered by the company. As sales is one of
the biggest issue which is faced by the company in current scenario. Best marketing strategy
which can be used by Twin River is designing a marketing mix which will help the company in
seeing all the aspect of marketing that is product, place, price and promotion of the product to
attract the eye of the consumer.
Operational management tool: It is the another important adoption which can be made
by Twin River, as it will help the company in having a good control over the expenses of the
organization. As the expenses is one of the alarming concern which need to be looked by the
organization. Operational management tool will help the company in keeping a close eye on the
wastage of the production in the organization which will eventually help the company in
incurring the less amount of the expenditure to produce the same quantity of product in the
organization. Some known operational management tool are Just In time, six sigma and Lean
production which can be adopted by the organization (Rahimi and Gunlu, 2016).
Customer feedback: It is the another way through which organization can improve the
sales of the company by taking the valuable comment of the customer and applying the same on
the product of the company, which will help the company in developing the product according to
customer need and satisfying the same in the organization.

CONCLUSION
After going through the above report it has been summarized that there are many
objective such as provide structure, predict cash flow which is brought by developing the budget.
After that the report has summarized that there are many adverse items which is seen in the
revenue and spending of company. In the end the report has summarized that inadequate
forecasting and sales are few concerns for organization, which can be overcome with the help of
operational management tool and marketing strategies.

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