Step-2 Answer-1 Coffeeville Company

Step-2
Answer-1
Coffeeville Company is a company engaged in selling food and beverages to customers. It operates
through stores in the country and marks it presence in the entire nation. The company has projected
sales of $1.26 Million and operating profit of $ 0.28 Million. Thus, the operating profit is nearly 20%
of the revenue of the company which is good for the business to grow. The major source of revenue
of the business comes from sales of foods followed by beverages and catering serviced. The
company gross profit stood at $ 0.66 which is nearly 50% of sales value of the company.
Thus, Coffeeville is engaged in three businesses mainly sale of foods, sale of beverages and catering
services.
Answer 2
Scope in a general parlance shall mean the extent or the region of the subject matter that it deals
with. From the financial perspective the term scope shall mean area which shall be covered by a
particular financial tool or matter. For instance in case of a sales budget the scope shall encompass
the quantity of the product, the price and the resultant amount. Thus, in finance scope shall mean
the subject matter range and extent.
Answer 3
The major component of a budget for a small business house like income and expenses, overhead
and cost of production, total of monthly, annual, average and projection totals. The major heads that
the budget shall include has been detailed here-in-below:
(a) Income from business;
(b) Expensed of Business;
(c) Production cost and overheads cost;
(d) Net Profit or loss;
(e) Project Annual performance;
https://smallbusiness.chron.com/major-components-master-budget-59414.html
The budget is considered a useful tool based on following rationale:
(a) Controlling income and expenditure;
(b) Allocation of responsibility to different departments;
(c) Establishing priorities and setting of goals in numerical terms;
(d) Improve efficiency;
(e) Motivate staff;
(f) Performance Monitoring.
https://www.tutor2u.net/business/reference/budgets
Answer 4
Political Factor
(a) Current Government policy like taxation and duties on export and import;
(b) Stability of government;
(c) Government action towards promoting the industry;

Economic Factor
(a) Rate of Inflation in the economy: These can make product costly ;
(b) Purchasing power of the people in the economy: Determines the demand and capacity to
purchase;
(c) Income per capita, interest rates and foreign exchange rate;
Social Factor
(a) Demographic of country like age of the people which determine the taste, habits and
preferences etc;
(b) Cultural beliefs of the people;
(c) Festival and occasions.
Technological Factor
(a) Changes in technology;
(b) Advanced packaging and presentation;
(c) New machinery manufacturing beverages.
Answer 5:
The three internal factors which could potentially impact on Coffeeville’s budget for the next 12
months are as follows:
1. Cost of Raw material which is a very important factor for the budget process as it could
increase the price of the product which could low the profitability of the company.
2. Labour cost could also increase the product price and can also decrease the profitability of
the company.
3. Government policy and stringent rules and regulations could also impact the production
process and hamper the sales and purchase leading to erosion in profit.As regulation by the
government regarding the purchase of raw material from the nearby suppliers and selling
the same product after complying with the stringent government regulation might delay the
process of selling.
Answer 6:
The five methods that the colleague and team could use to communicate and contribute their ideas
and research to the budget planning process are :
 Letter
 Email
 Communicating to senior
 Co ordination among team
 Creating a Proper Feedback channel
Answer 7:

Different types of method can be used to measure and monitor the budget are:
 Using of Spreadsheet.
 Investment in accounting software
 Having a look into the future
Answer 8:
The two methods which can be used after the budget is prepared and finalised are as follows:
 Audit Analysis and Engagement
 Impact Analysis (International Budget Partnership., 2019)
Answer 9:
Budget monitoring is a subjective phenomenon and depends on needs of the organisation. It can
take place on a regular basis to measure the performance against the budgeted or in a weekly period
or monthly period depends on the need of organisation.
https://www.sheffield.ac.uk/finance/staff-information/howfinanceworks/allocating_budgets
Answer 10:
In case there has been an increase expenditure over the budgeted outlay the same shall be notified
to the management (head of department) and then to the concerned individual budget holders for
appropriately controlling the same through corrective action.
The same shall be generally submitted during monthly or quarterly meeting of department heads
and individual budget holder.
Answer 11:
The steps that shall be taken to rectify the deviations has been detailed here-in-below:
(a) Setting up of performance standard encompassing both qualitative and quantitative standard
like revenue goal and motivation of employees etc;
(b) Taking corrective action like in case of obsolete machinery change the same with new
machinery, in case of defective material used improve the standard quality of material.
http://www.businessmanagementideas.com/management/controlling-process-in-business-
management-5-steps/2403
Zero based budgeting