Managing Human and Financial Resources Assessment 2022

Student Number (s):
Programme:(e.g. Business
Management)
Module Title: (e.g. Studying
for Business)
Managing Human and Financial
Resources
Seminar
Group
Module Code: HR7003 Word Count
In submitting this assessment, I confirm that no part of this assignment. Except were quoted
and referenced. Has been copied from material belonging to any other person e.g. from a
book. Hand-out, another student. I am aware that it is a breach of UEL regulations to copy
the work of another without clear acknowledgment and that attempting to do so renders me
liable to disciplinary proceedings.
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Executive summary
The main focus of this report was on providing a variance analysis report by comparing
actual data and estimated data provided by the management. Based on such analysis, it can be
said that the overall cost of operation has exceeded its estimation which has resulted in a
negative impact on the profit generation capabilities of the company. It can be said that due to
inefficient budgeting activities overall profit generation capabilities of Fleet Highland Cafe
have decreased by 13%.
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Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................4
A) The objective of preparing the budget..................................................................................5
B) The report showing the company’s revenue and spending variance.....................................7
C) The variance of concern for the management.......................................................................9
D) Recommendation to survive and maintain profitability......................................................11
Conclusion................................................................................................................................12
References................................................................................................................................13
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Introduction
The primary objective of this report is to conduct variance analysis following the budget
prepared by the organization. Data concerning the budgeting process and actual data recorded
by the accounting department has been described in the given scenario. The main objective of
the managers will be to identify whether the financial performance of the organization has
been following the developed budgets. This report will help in identifying variances between
the budgeted and actual performance of the company (Jones et.al, 2018). In addition to those
objectives of preparing a budget will also be described in this report along with providing
some recommendations based on variance analysis for the management of Fleet Highlands
Cafe.
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A) The objective of preparing the budget
Following are some of the objectives that could have been considered by the management of
Fleet Highlands Cafe before the development of the budgets-
Cost controlling- One of the primary objectives of any business organization behind the
preparation of the budget is controlling the cost of operation. The function that is performed
in the budgeting process is to identify cost elements and develop standards for each of the
elements identified in this process. Example management of the organization will identify
marketing expenses as cost elements and decide a standard based on past marketing expenses
undertaken by the company. The type of standard will help the organization to ensure that all
the activities are under the planning.
Allocation of resources- Another important objective of business that is achieved with the
help of budgeting processes is the allocation of different resources available with the
organization (Marzlin Marzuki & Ismail, 2019). Financial resources and other resources are
generally available in limited nature with any business organization and such organizations
need to make sure that every business activity is getting the appropriate amount of financial
resources to generate revenue for the company. In addition to that other resources such as
human resources can also be allocated based on the priority given to a particular cost element.
Financial performance analysis- Financial analysis of a business organization can also be
conducted with the help of variance analysis which is an integral part of the budgeting
process. This type of analysis helps a business organization to identify the areas of concerned
or problematic areas in a particular organization. For example, if a particular cost element is
exceeding significantly as compared to its standard so that there is a probability that
management is not to operating efficiently concerning such elements. It can be said that the
overall efficiency of business operations can be increased significantly with the help of the
budgeting process (Matsuoka, 2018).
Assignment of priority and resource utilization - The budgeting process will also help in
identifying the significance of a particular cost element on the overall financial and
operational aspects of the business. This type of analysis can help the business organization
to allocate financial resources and other resources such as human resources in a more
effective manner (Kolias and Arnis, 2019). It can be said that the overall resource utilization
of business operations can be increased significantly with the help of priority alignment.
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Governance on operational departments- Governance of operational department by general
managers can also be executed effectively as standard will be set concerning departmental
cost to be spent by an organization. In addition to that direction can also be provided by
managers to employees by the allocated cost (Banerjee, 2019).
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B) The report showing the company’s revenue and spending variance
The following statement can be analysed for identifying variances between revenue and
spending of the cafe under consideration-
Revenue variance
Particulars
Plannin
g Actual
Budgeted meals quantity 20000 18000
Revenues (£5.00q) 100000 90000
According to the budget of the budget prepared by the organization total units expected to be
sold in the accounting period under consideration were 20000 units. The selling price per unit
was estimated to be £5 which would have resulted in total revenue of £100000. On the other
hand management of the organization was able to sell 18,000 units in the accounting period
which resulted in total revenue of £90000. Based on this evaluation, it can be said that there
is an adverse revenue variance of 10000 in terms of revenue and 2000 in terms of the number
of units sold. It can be said that the revenue of the organization was not able to meet the
standards set during the budgeting process in terms of several units as well as total revenue
(Otley, 2016). It can also be analysed that the selling price per unit estimated by the
organization was accurate.
Spending variance-
Particulars Planning
Adjusted
planning Actual Variance
Expenses:
Raw material (£2.50q) 50000 45000 45000 0
Wages and salaries (£5
500+£0.25q) 10500 9450 10000 -550
Utilities (£2 500 + £0.05q) 3500 3150 3400 -250
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Facility rent 5000 4500 5500 -1000
Insurance 2800 2520 3200 -680
Fuel 2500 2250 2800 -550
Total expenses 74300 66870 69900 -3030
The organization needs to adjust the standards under the units sold by the organization.
Standard were set station that 20,000 units will be sold in the accounting period but only
18000 units were sold, therefore all the standards cost will be adjusted following 18000 units.
The total cost incurred by the organization in the generation of revenue will be considered in
the determination of spending revenue. According to the budget prepared by the organization,
total expenses expected to be incurred in the accounting period under consideration was
£66870 for 18000 units. The total actual cost incurred by the organization during this period
was £69900 (Trucco, 2016). It shows that the total cost of operation has exceeded the
standards made by the organization which will result in an adverse spending variance of
£3030.
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C) The variance of concern for the management
Three major elements of cost that should be considered as a concern by the management are
as follows-
Particulars
Plannin
g
Adjuste
d
plannin
g Actual Variance
%
Varianc
e
Adverse(A)/
Favourable(F
)
Budgeted meals
quantity 20000 18000 18000 0 -
Revenues
(£5.00q) 100000 90000 90000 0 -
Expenses:
Raw material
(£2.50q) 50000 45000 45000 0 -
Wages and
salaries (£5 500+
£0.25q) 10500 9450 10000 -550 -5.820 A
Utilities (£2 500
+ £0.05q) 3500 3150 3400 -250 -7.937 A
Facility rent 5000 4500 5500 -1000 -22.222 A
Insurance 2800 2520 3200 -680 -26.984 A
Fuel 2500 2250 2800 -550 -24.444 A
Total expenses 74300 66870 69900 -3030 -4.531 A
Net Operating
Income 25700 23130 20100 3030 13.100 A
Facility rent
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This type of expense generally pre-determined by the organization and it is important to
ensure that accuracy is maintained in the process of making assumptions. Total expected rent
during the initiation of the accounting period was estimated to be 4500 where is expensive
was 22% higher as compared to the standard (Weetman, 2019).
Fuel expenses
Total fuel expenses have also been very high as compared to the estimations mean by the
organization during the initial phase. The budgeted cost was estimated in terms of 18000
units was estimated to be £2250 whereas actual expenses went up to £2800 (Shields, 2018). It
clearly shows that management was not able to control the cost of operation as it has
exceeded by 24% as compared to the expectation.
Insurance cost
The budgeted cost was estimated in terms of 18000 units was estimated to be £2520 whereas
actual expenses went up to £3200. It clearly shows that management was not able to control
the cost of operation as it has exceeded by 24% as compared to the expectation.
On an overall analysis, it can be said that the management of the organization is required to
focus on controlling the cost of operation. This is one of the reasons that the overall
profitability of the organization has decreased in the accounting period under consideration
(Jiambalvo, 2019). The total profit recorded by the organization concerning 1800 units was
estimated to be £23130 where is the actual profit generated in this accounting period was
only £20100. Net income generated by the organization has been 13% lower as compared to
expectations. The primary reasons behind this decreased profitability margin of three cost
elements as described above.
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D) Recommendation to survive and maintain profitability
Following are the steps that are required to be taken by the management of Fleet Highlands
Cafe are as follows-
The efficiency of the budgeting process- First of all, experts in the field of budgeting should
be hired by the organization to conduct the process of budgeting. This is because the
management of the organization was not able to make correct estimations concerning the
demand for the product in the market (Weygandt et.al, 2018). Experts will help in conducting
primary research in the industry which will help in making correct estimations under the
business environment.
Resource utilization- Management of the organization should consider the three cost elements
i.e. facility rent, insurance and fuel as the problem area under consideration as variance
associated with these three cost elements are more than 20% in the negative direction. A
better resource utilization processor should be used to make sure that the cost of operation
does not exceed the expectation (Weygandt, Kimmel and Kieso, 2018).
Cost controlling strategies- Apart from budgeting other cost controlling strategies should also
be executed in the company. For example, bonus and commission should be dependent on the
cost variance identified for each department working in the company. If a particular
department is exceeding its cost of estimated without any justifiable reason, then the amount
of variance should be deducted from the commissions and bonus is to be distributed to
employees in such departments (Yadav and Avhad, 2019).
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Conclusion
An overall conclusion of this report it can be said that the budgeting process is an effective
cost controlling strategy that can help organizations to maintain desired profitability margin.
The overall process of budgeting undertaken by fleet Highland Cafe is not very efficient as
the majority of the expenses are exceeding the expectation. Management of the organization
is required to conduct an overall analysis of the process and implement other cost controlling
strategies to maintain profitability.
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References
Banerjee, B., 2019. Labour Cost Variance Analysis Through Diagrams-Integration to MIS.
The Management Accountant Journal, 54(6), pp.61-66.
Jiambalvo, J., 2019. Managerial accounting. John Wiley & Sons.
Jones, C., Finkler, S.A., Kovner, C.T. and Mose, J., 2018. Financial Management for Nurse
Managers and Executives-E-Book. Elsevier Health Sciences.
Kolias, G. and Arnis, N., 2019. The optimal allocation of current assets using mean-variance
analysis. Accounting and Management Information Systems, 18(1), pp.50-72.
Marzlin Marzuki, N. A. R., & Ismail, J. (2019). Benefits and limitations of variance analysis
in management accounting. ACCOUNTING BULLETIN, 15.
Matsuoka, K. (2018). Variance Analysis in Fixed Revenue Accounting. Fixed Revenue
Accounting: A New Management Accounting Framework, 15, 69.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research, 31, pp.45-62.
Shields, M.D., 2018. A Perspective on Management Accounting Research. Journal of
Management Accounting Research, 30(3), pp.1-11.
Trucco, S., 2016. Financial accounting. Springer international PU.
Weetman, P., 2019. Financial and management accounting. Pearson UK.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2018. Financial and Managerial Accounting.
John Wiley & Sons.
Weygandt, J.J., Kimmel, P.D., Kieso, D.E. and Aly, I.M., 2018. Managerial Accounting:
Tools for Business Decision-making. John Wiley & Sons.
Yadav, R.R. and Avhad, S.M., 2020. Introduction to Cost and Managerial Accounting.
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