Variance Report for Red Bicycle Ltd

This document provides a variance report for Red Bicycle Ltd, analyzing the budgeted and actual results of the business. It also discusses contingency plans to reduce sales volume and cut down costs.

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Task 2...............................................................................................................................................2
Variance Report for Red Bicycle Ltd..........................................................................................2
Contingency Plans.......................................................................................................................4
Implementing contingency plan..................................................................................................6
Task 3...............................................................................................................................................6
Part 1............................................................................................................................................6
Part 2............................................................................................................................................7
Part 3............................................................................................................................................7
Part 4................................................................................................................................................9
Reference.......................................................................................................................................10

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Task 2
Variance Report for Red Bicycle Ltd
FY Actual $Var %Var Q1 Actual Var %Var Q2 Actual $Var %Var Q3 Actual $Var %Var Q4 Actual $Var %Var
77,500 72,500 (5,000) (6%) 17,500 15,000 (2,500) (14%) 25,000 22,500 (2,500) (10%) 17,500 15,000 (2,500) (14%) 17,500 15,000 (2,500) (14%)
200,000 200,000 0.00 0% 50,000 50,000 0.00 0% 50,000 50,000 0.00 0% 50,000 50,000 0.00 0% 50,000 50,000 0.00 0%
3,100,000 2,900,000 (200,000) (6%) 700,000 600,000 (100,000) (14%) 1,000,000 900,000 (100,000) (10%) 700,000 800,000 100,000.00 14% 700,000 600,000 (100,000) (14%)
400,000 380,000 (20,000) (5%) 100,000 95,000 (5,000) (5%) 100,000 95,000 (5,000) (5%) 100,000 95,000 (5,000) (5%) 100,000 95,000 (5,000) (5%)
2,422,500 2,247,500 (175,000) (7%) 532,500 440,000 (92,500) (17%) 825,000 732,500 (92,500) (11%) 532,500 640,000 107,500.00 20% 532,500 440,000 (92,500) (17%)
- - - - -
- - - - -
20,000 22,000 2,000.00 10% 5,000 4,000 (1,000) (20%) 5,000 6,000 1,000.00 20% 5,000 6,000 1,000.00 20% 5,000 6,000 1,000.00 20%
5,000 4,500 (500) (10%) 1,250 1,050 (200) (16%) 1,250 1,150 (100) (8%) 1,250 1,150 (100) (8%) 1,250 1,150 (100) (8%)
600 700 100.00 17% 150 200 50.00 33% 150 200 50.00 33% 150 150 0.00 0% 150 150 0.00 0%
5,000 4,000 (1,000) (20%) 1,250 1,000 (250) (20%) 1,250 1,000 (250) (20%) 1,250 1,000 (250) (20%) 1,250 1,000 (250) (20%)
400 500 100.00 25% 100 125 25.00 25% 100 125 25.00 25% 100 125 25.00 25% 100 125 25.00 25%
500 600 100.00 20% 125 150 25.00 20% 125 150 25.00 20% 125 150 25.00 20% 125 150 25.00 20%
10,000 11,200 1,200.00 12% 2,500 2,800 300.00 12% 2,500 2,800 300.00 12% 2,500 2,800 300.00 12% 2,500 2,800 300.00 12%
50,000 45,000 (5,000) (10%) 25,000 20,000 (5,000) (20%) 25,000 25,000 0.00 0% - - 0.00 0% - - 0.00 0%
25,000 25,000 0.00 0% 6,250 6,250 0.00 0% 6,250 6,250 0.00 0% 6,250 6,250 0.00 0% 6,250 6,250 0.00 0%
- 0.00 - - 0.00 - - 0.00
200,000 208,000 8,000.00 4% 50,000 52,000 2,000.00 4% 50,000 56,000 6,000.00 12% 50,000 50,000 0.00 0% 50,000 50,000 0.00 0%
- - - 0.00 - - 0.00
45,000 45,000 0.00 0% 11,250 11,250 0.00 0% 11,250 11,250 0.00 0% 11,250 11,250 0.00 0% 11,250 11,250 0.00 0%
500,000 500,000 0.00 0% 125,000 125,000 0.00 0% 125,000 125,000 0.00 0% 125,000 125,000 0.00 0% 125,000 125,000 0.00 0%
20,000 23,000 3,000.00 15% 5,000 6,000 1,000.00 20% 5,000 5,000 0.00 0% 5,000 6,000 1,000.00 20% 5,000 6,000 1,000.00 20%
- - - - - 0.00
Electricity 40,000 38,000 (2,000) (5%) 10,000 8,000 (2,000) (20%) 10,000 10,000 0.00 0% 10,000 10,000 0.00 0% 10,000 10,000 0.00 0%
Insurance 100,000 100,000 0.00 0% 25,000 25,000 0.00 0% 25,000 25,000 0.00 0% 25,000 25,000 0.00 0% 25,000 25,000 0.00 0%
Rates 100,000 100,000 0.00 0% 25,000 25,000 0.00 0% 25,000 25,000 0.00 0% 25,000 25,000 0.00 0% 25,000 25,000 0.00 0%
Rent 200,000 200,000 0.00 0% 50,000 50,000 0.00 0% 50,000 50,000 0.00 0% 50,000 50,000 0.00 0% 50,000 50,000 0.00 0%
Water 30,000 35,000 5,000.00 17% 7,500 10,000 2,500.00 33% 7,500 10,000 2,500.00 33% 7,500 7,500 0.00 0% 7,500 7,500 0.00 0%
Waste
Removal
50,000 60,000 10,000.00 20% 12,500 15,000 2,500.00 20% 12,500 15,000 2,500.00 20% 12,500 15,000 2,500.00 20% 12,500 15,000 2,500.00 20%
1,401,500 1,422,500 21,000.00 1% 362,875 362,825 (50) (0%) 362,875 374,925 12,050.00 3% 337,875 342,375 4,500.00 1% 337,875 342,375 4,500.00 1%
1,021,000 825,000 (196,000) (19%) 169,625 77,175 (92,450) (55%) 462,125 357,575 (104,550) (23%) 194,625 297,625 103,000.00 53% 194,625 97,625 (97,000) (50%)
255,250 206,250 (49,000) (19%) 42,406 19,294 (23,113) (55%) 115,531 89,394 (26,138) (23%) 48,656 74,406 25,750.00 53% 48,656 24,406 (24,250) (50%)
765,750 618,750 (147,000) (19%) 127,219 57,881 (69,338) (55%) 346,594 268,181 (78,413) (23%) 145,969 223,219 77,250.00 53% 145,969 73,219 (72,750) (50%)
Preparered by: Pat Roberts
Sales
Cost of Goods Sold
Gross Profit
Big Red Bicycle
Budget Variation Report FY 2011/ 2012
REVENUE
Commissions
Direct wages fixed
EXPENSES
General & Administrative Expenses
Travel
Legal Fees
Bank Charges
Office Supplies
Postage & Printing
Dues &
Subscriptions
Telephone
Repairs &
Maintenance
Staff Amenities
Payroll Tax
Marketing Expenses
Advertising
Occupancy Costs
Employment Expenses
Superannuation
Wages & Salaries
NET PROFIT AFTER TAX
TOTAL EXPENSES
NET PROFIT (BEFORE INTEREST & TAX)
Income Tax Expense (25%Net)
The above figure shows the variance report which is related to the business of Red
Bicycles ltd which is engaged in providing bicycles to the management (Bryce, 2017). The
variance report is formulated by the management of the company on the basis of the budgeted
results which is formulated by the management and also the actual results of the business in

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order to make appropriate comparisons between the same. Variance report generated by the
management reveals that gross profit of the company is unfavourable. In the same way, net profit
too is unfavourable. Hence, the management is required to make out some plans for minimising
this gap as 14% variance was expected by business.
The management of the company would be formulating different strategies on the basis
of the results from the performance of the business. In accordance with the management’s
strategic plan its aim is to earn $ 10,00,000 before tax expenses. Further, the company is thinking
of expanding their business through manufacturing over the foreign market and it is expected
that it will be helpful for the company to take the competitive advantages. As per the details
provided in the master budget that is prepared by the management the amount of sales is $
29,000,000 that is estimated for the year. Master budget of the company for the year 2011-12
will be compared with the actual revenues and expenses. It has been identified that the sales
amount as per the budget is $ 6,00,000 during the 1st quarter of the year and the same for 2nd
quarter is amounted to $ 9,00,000. It is further observed that the sales under the budget are
evenly spread however, in actual it is not feasible as the sales of any company generally
fluctuates based on the demand, economic condition and manufacturing quantity.
Contingency Plans
The contingency plans which are formulated by the management of the company is
directed towards reducing the sales volume of the business which would severely affect the
operations of the business. The contingency plans are formulated by the management in order to
reduce the impact of such losses on the business and appropriate steps needs to be taken in order
to ensure that sales volume of the business can be reduced significantly (Ginter, Duncan &
Swayne, 2018). The management of the company can cut down the costs of the business by

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reducing wastage of resources. In addition to this, the management of the company also needs to
undertake sales coaching and training program for the purpose of improving the sales of the
business and ensure that the revenue which is generated by the business is enhanced.
Contingency Plan
Company name: Big Red Bicycle Pty Ltd
Person developing the plan:
Name :
Position: Managing Director
Risk identified: Profit variance with actual is more than 10%
Strategies/activities to minimize the risk By when By whom
Produce the variation reports quarterly for identifying the
income and expenses and shortfalls in profit over 10%.
Q2 Operations
Manager
Implementing sales training Q2 Sales
Manager
Implement the incentives program. Q2 Operation
Manager
Reduce the overtime. Q2 Managing
Director

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Implementing contingency plan
Risk identified: Reduction in Net profit
Activity Monitoring activity and
date
Person/s
Monitor variance. Completion of report:
Q2.
Operation
Manager
Analysis of the report for identifying
issues.
Management report: Q2. Operation
Manager
Email to employees for warning
regarding risks associated to jobs.
Monitoring of the
variation report results:
Q4.
Sales Manager
Email for announcing increasing of the
commission from 2% to 2.5%.
Monitoring of the
variation report results:
Q3.
Sales Manager
Task 3
Part 1
As per the business which is considered in the assessment is planning to enhance the
sales of the business and effectively analyse the business situation (Dudin et al. 2015). As per the
case which is provided in the assessment, the management of the company relies more on credit

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sales for the purpose of achieving the sales targets of the business. In order to formulate the
budget, the management of the company needs to appropriately take feedback from various
departments while formulating budgets for the business.
Part 2
The management of the company can appropriately communicate regarding the budgets
which is formulated by the management by email which can be sent to different departments
(Dzhandzhugazova et al., 2015). The management of the company also has the option of
conducting a meeting for communicating the targets which are set by the management of the
company and also different areas of consideration which needs to be considered by the
management of the company.
Part 3
Current Policy of the Business
Actual Figures Predicted Figures
Particulars
Aug
ust
Septe
mber
Oct
obe
r
Nove
mber
Dece
mber
Jan
uar
y
Febr
uary
Ma
rch
Apr
il
Ma
y
Jun
e July
Sales
100
000
1150
00
115
000
1000
00
1200
00
140
000
120
000
125
000
125
000
120
000
120
000
110
000
60% in first
month after sale
600
00
6900
0
690
00
6000
0
7200
0
840
00
720
00
750
00
750
00
720
00
720
00
660
00
25% in second
month after sales
2500
0
287
50
2875
0
2500
0
300
00
350
00
300
00
312
50
312
50
300
00
300
00
14% in third
month after sales
140
00
1610
0
1610
0
140
00
168
00
196
00
168
00
175
00
175
00
168
00
Total
160
000
2090
00
226
750
2048
50
2331
00
268
000
243
800
249
600
248
050
240
750
239
500
222
800
Policy Option No 1
Actual Figures Predicted Figures

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Particulars
Aug
ust
Septe
mber
Oct
obe
r
Nove
mber
Dece
mber
Jan
uar
y
Febr
uary
Ma
rch
Apr
il
Ma
y
Jun
e July
Sales
100
000
1150
00
115
000
1000
00
1200
00
140
000
120
000
125
000
125
000
120
000
120
000
110
000
80% in first
month after sale
800
00
9200
0
920
00
8000
0
9600
0
112
000
960
00
100
000
100
000
960
00
960
00
880
00
12% in second
month after sales
1200
0
138
00
1380
0
1200
0
144
00
168
00
144
00
150
00
150
00
144
00
144
00
7% in third
month after sales
700
0 8050 8050
700
0
840
0
980
0
840
0
875
0
875
0
840
0
Total
180
000
2190
00
227
800
2018
50
2360
50
273
400
241
200
249
200
248
400
239
750
239
150
220
800
Policy Option No 2
Actual Figures Predicted Figures
Particulars
Aug
ust
Septe
mber
Oct
obe
r
Nove
mber
Dece
mber
Jan
uar
y
Febr
uary
Ma
rch
Apr
il
Ma
y
Jun
e July
Sales
100
000
1150
00
115
000
1000
00
1200
00
140
000
1200
00
125
000
125
000
120
000
120
000
110
000
90% in first
month after sale
900
00
1035
00
103
500
9000
0
1080
00
126
000
1080
00
112
500
112
500
108
000
108
000
990
00
5% in second
month after
sales 5000
575
0 5750 5000
600
0 7000
600
0
625
0
625
0
600
0
600
0
3% in third
month after
sales
300
0 3450 3450
300
0 3600
420
0
360
0
375
0
375
0
360
0
Total
190
000
2235
00
227
250
1992
00
2364
50
275
000
2386
00
247
700
247
350
238
000
237
750
218
600
The above analysis shows that 2nd option is most appropriate for the business as the
business is able to collect more revenues on year to year basis. The management of the company
however needs to control the costs of the business.

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Part 4
As per question of Hugo, the additional discount is shown to have significantly enhance
the sales of the business. The third proposal of the business is shown to be appropriate for the
business.

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Reference
Bryce, H. J. (2017). Financial and strategic management for nonprofit organizations. Walter de
Gruyter GmbH & Co KG.
Dudin, M., Prokofev, M., Fedorova, I., Frygin, A., & Kucuri, G. (2015). International Practice of
Generation of the National Budget Income on the Basis of the Generally Accepted Financial
Reporting Standards (IFRS).
Dzhandzhugazova, E. A., Zaitseva, N. A., Larionova, A. A., Petrovskaya, M. V., & Chaplyuk, V.
Z. (2015). Methodological aspects of strategic management of financial risks during construction
of hotel business objects. Asian Social Science, 11(20), 229.
Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2018). The strategic management of health care
organizations. John Wiley & Sons.