Accounting Homework: Variance Analysis and Cash Budget - University

This accounting homework assignment focuses on variance analysis and cash budgeting. The solution includes a flexible budget analysis comparing actual results with budgeted figures, identifying favorable and unfavorable variances for revenue and various cost categories such as labor, golf cart fuel, maintenance, and depreciation. The analysis highlights the owner's concerns about profitability and potential inefficiencies. Additionally, the assignment includes a cash budget problem, requiring the calculation of coffee sales revenue, considering different coffee sizes, payment methods (cash and credit), and associated material and labor costs to project cash flow for several months. The solution addresses the importance of controlling expenditure and provides a detailed breakdown of the calculations involved in the cash budgeting process.

Running head: ACCOUNTING
Accounting
Name of the Student
Name of the University
Author Note

1
ACCOUNTING
Table of Contents
Answer to Question 3...................................................................................................................2
Answer to Question 4...................................................................................................................2
References....................................................................................................................................3

2
ACCOUNTING
Answer to Question 2
Details Flexible
Budget
Actual Variances Favourable/Unfavourable
Number of Golf Rounds 6000 5000
Revenue
Golf Rounds 264000 22000
0
44000 Unfavourable
Power Carts 150000 12500
0
25000 Unfavourable
414000 34500
0
69000 Unfavourable
Variable Costs
Labour 126000 10500
0
21000 Favourable
Golf Cart Fuel 3000 2500 500 Favourable
Maintenance 84000 70000 14000 Favourable
Small Tools 24000 20000 4000 Favourable
Depreciation 24000 20000 4000 Favourable
261000 21750
0
43500 Favourable
Fixed Costs
Management Fees 35000 35000 0
Rent 35000 35000 0

3
ACCOUNTING
Utilities 8000 8000 0
78000 78000 0
Income (Loss) before taxes 75000 49500 25500 Unfavourable
The owner’s opinion on the golf courses is justified because the preparation of a flexible
budget on the basis of the previous month’s results suggests that the business is not being able to
generate sufficient profits as previously budgeted by it. Hence, as the Income before taxes earned
by the entity is lower than the projected income to be earned by the entity, it can be suggested
that the business is not being able to bring its overall expenditure into control. This needs to be
improved upon by the business.
b) Some of the line items on which I want to identify the variances include the labour variances,
maintenance costs, depreciation, small tools and maintenance. These are some of the items where
the variances of the business are very high. The reasons for the variance are an indicator of
inefficiency on the part of the business. Hence, in order to analyse the reasons for this
inefficiency, these items will be investigated.