Role of Budgets in Companies: A Report on Twin Rivers Café

This report discusses the role of budgets in companies, focusing on Twin Rivers Café. It covers the objectives of budgeting, revenue and spending variances, activities that need management attention, and advice to fulfill objectives.

FINANCE PROJECT

Contents
EXECUTIVE SUMMARY.........................................................................................................................3
MAIN BODY..............................................................................................................................................3
CONCLUSION...........................................................................................................................................6
REFERENCES............................................................................................................................................7

EXECUTIVE SUMMARY
The report summarize about role of budgets in companies. Basically, the financial plans
help in better allocation of monetary reports. The report abstracts information about objective of
budgets of Twin Rivers café as well as about variance between actual and estimated items. The
end part of report summarizes information regards to suggestions to enhance performance of
given business enterprise.
MAIN BODY
(a) Objective of preparing budget for Twin Rivers café.
Budget- The budget is a savings plan for a specified period of time, sometimes one year. It may
also involve expected sales volumes and profits, resource size, costs and expenses, properties,
obligations and cash flows (Savage, 2019). Business, governments, communities and other
groups use it to describe tactical action plans or activities in tangible terms. In the context of
above company they produce budget for below mentioned objectives:
 Keeping extra sight of eye over monetary performance- The main goal of creating
a budget is to use it as a framework for evaluating the efficiency of different
activities through the use of budget differences (Ilott, 2013). This is main
objective of budget because in accordance of it managers keep themselves in
touch of actual revenues. Such as in the Twin Rivers café, they analyze
performance by making variation between actual and budgeted activities.
 Controlling over expenses- This is one of the main objectives of preparing
budgets which is related to making effective control over different elements’ cost
(Barr and Turner, 2013). It becomes possible because by help of a proper
financial plan, managers of company allocate funds accordingly so that cost can
be minimized. Such as in the aspect of Twin Rivers café, their main objective is to
control overall expenses.
(b) Preparation of a report showing the company’s revenue and spending variance for July.
Planning Actual Variance
Budgeted meals quantity (q) 18000 17800 200A
Revenue (4.50 q) 81000 80100 900A
Expenses:
Raw material (2.40q) 43200 42720 480F

Wages and salaries (5200+0.30q) 10600 10540 60F
Utilities 3300 3290 10F
Facility rent (2400+0.05q) 4300 5100 800A
Insurance 2300 2600 300A
Fuel 2480 2490 10A
Net operating income 14820 13360 1460A
Analysis- On the basis of above prepared table this can be find out that there is variance in actual
and budgeted activities. Such as in the aspect of revenues this can be assessed that there is
adverse variance. Like company planned to gain revenue of 81000 but in actual they earned
revenue of 80100 and occurred with adverse variance of 900. While in the context of expenses
there are some variances in positive and negative manner. Such as cost of raw material is in
favorable condition and wages & utility cost is also in favorable situation. For example there is
favorable variance is of 480, 60 and 10 for raw material, wages and utility.
Apart from it, the unfavorable variances are of 800, 300 and 10 on factory rent, insurance and
fuel. In the end, variance on net operating income is of 1460 A. In accordance of above analysis,
it can be stated that Twin Rivers café‘s performance is in negative form. It is so because most of
the variances are in negative form and this may lead as a huge concern to them. As well as the
higher adverse variance is of 900 on revenue. While the lowest adverse variance is of 10 of fuel.
In addition, in the context of favorable variance higher is of 480 which is on raw material and
lowest favorable variance is of 10 which is on Utilities. So, this is overall analysis of report on
variance between planned and actual activity of Twin Rivers café.
(c) Activity which is needed to be concern with the management.
As accordance of above stated table of River café, this can be find out that there is more
number of activities whose variance is in negative and needed to be concern with
management department. This is so because management team can prepare plans and
strategies in order to overcome the variance. Herein, below some activities are mentioned
which are needed to be concern with management:
 Facility rent- The cost of facility rent was planned of 4300 but in actual, it
occurred of 5100. Hence, there is adverse variance of 800. In this context
management should make contribution so that cost of facility rent can be
decrease. As well as this is a huge difference between actual and planned amount
of rent.
 Insurance- In the aspect of amount of insurance, this can be find out that there is
adverse variance of 300 which is needed to be concern with the management team
of above Twin Rivers café. Eventually, they planned to cost of insurance of 2300
but in actual they faced the cost of 2600. As a result negative variance occurred to
them.

 Fuel- Similar as the above mentioned expenses, there is negative variance of 10.
The finance department planned cost of 2480 but in actual they occurred with cost
of 2490. This activity is needed to be concern with the management of above
company. In this context the management team of above café should make focus
on those elements which are becoming as a cause of higher fuel charge.
So these are the all activities in the aspect of expenses which are needed to be concern with
management team of above company. Apart from it, there are some other activities which are to
be presented in front of management department. As well as these activities are linked to income
and revenues. Herein, below description of these activities is done in such manner:
 Budgeted meals quantity- In the aspect of this activity, it can be find out that above Twin
Rivers café made plan of producing meals of 18000 in terms in quantity but in actual they
produced quantity of 17800. Hence, the variance is of 200. This variation of meals
quantity is needed to be concern with the management team so that they can find out
cause of this variation. If they will do so then it will be easy to produce similar quantity
of meals. Though, this is not a huge difference and it can be covered up.
 Revenue- This is one of the activity in any budget which should be in favorable
condition. It is completely based on the total volume of sales that a company can generate
in a particular time period (Hinderer, 2012). In the context of above Twin Rivers café, it
can be find out that there is adverse variance of 900. They planned to generate revenue of
81000 but in actual they produced only of 80100. It is a big concern which is needed to
concern with the management team of café.
 Net operating income- Due to higher amount of expenses, the net operating is also in
negative form. Such as they planned to gain net operating income of 14820 but in actual
they earned revenue of 13360. In this context, this is important for finance department of
above company that they should concern with management team.
In the end, this can be stated that these are activities which are essential for finance
department to concern with management team so that they can find alternatives to
overcome this adverse variation.
(d) Advice to company to fulfill their objectives.
In accordance of above discussion of budgeted and actual activities of Twin rivers café,
this can be found out that there are different types of activities which are under
expectations. In this context it is important to them that they should take suitable actions
and steps so that their objectives can be achieved. Herein, below some suggestions are
demonstrated in such manner which is as follows:
 Minimize the expenses- It is main concern for above café that their expenses are
more than the expected costs. In this context, it is essential to them they should

focus on cause which is leading as higher expenses as well as they should
implement effective strategies in order to meet the expectations. Eventually, the
cost is a main term in order to success of a business. If it will be lower than
revenues will automatically will be higher. So overall, the above café should
make focus on controlling expenses.
 Focus on revenue generating activities- This is main goal of each kinds of
business entity to gain higher amount of profits (Sokolova, Sukhotin and Lannig,
2012). In the aspect of above café, it can be find out that their revenue and net
operating is in adverse form. Thus, they should try to keep their focus on those
elements which are becoming cause of lower revenues. If they will do so then
their actual revenue will raise and meet with estimated range. As well as their
objective of keeping an extra sight of eye on performance will be fulfill.
CONCLUSION
On the basis of above project report, it can be concluded that budgets are too essential for
managing overall monetary performance. The report concludes about variation between actual
and estimated items of given data of a café. Along with objectives of budgets is also concluded
in detailed manner. In the end part of report, suggestions are given to business in order to meet
objectives.

REFERENCES
Books and journals:
Savage, J., 2019. Balanced budgets and American politics. Cornell University Press.
Barr, A. and Turner, S. E., 2013. Expanding enrollments and contracting state budgets: The
effect of the Great Recession on higher education. The ANNALS of the American
Academy of Political and Social Science. 650(1). pp.168-193.
Hinderer, M., 2012. From gullies to mountain belts: a review of sediment budgets at various
scales. Sedimentary Geology. 280. pp.21-59.
Sokolova, I. M., Sukhotin, A. A. and Lannig, G., 2012. Stress effects on metabolism and energy
budgets in mollusks. In Oxidative stress in aquatic ecosystems (pp. 263-280). Wiley-
Blackwell.
Ilott, T., 2013. Budgets and markets: a study of the budgeting of European films. Routledge.