Financial Analysis of Fleet Highlands Cafe: Budgeting and Variance

This report provides a comprehensive analysis of the Fleet Highlands Cafe's financial performance, focusing on budgeting and variance analysis. It begins by outlining the objectives of preparing a budget, emphasizing revenue and expense projections to improve financial management and performance. The report then details the variance analysis, comparing budgeted and actual figures to identify deviations in revenue, raw materials, wages, utilities, facility rent, insurance, and fuel. The analysis reveals unfavorable variances in revenue due to lower meal quantities and increased expenses in several areas, such as facility rent, insurance, and fuel. The report identifies key concerns for management, including the decline in meal quantity sold and rising operational costs. Finally, the report offers strategic recommendations for Fleet Highlands Cafe to maintain profitability and sustainability, including improving food quality, enhancing customer service, and implementing effective marketing strategies. The report concludes by emphasizing the importance of continuous monitoring and adjustment to achieve long-term financial success.

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Budgets and financial planning

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Table of Contents
Introduction................................................................................................................................3
a).................................................................................................................................................3
b)................................................................................................................................................3
c).................................................................................................................................................4
d)................................................................................................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7

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Introduction
Budgeting is the process that is required to be carried in the business for the appropriate
planning of the incomes and expenses that will be involved. In the making of the budget,
there will be consideration of various aspects that are relevant and they will be benefitting it
in attaining the goals and targets. In the given case of fleet highlands case, there will be
consideration of the budget and the performance which is made. In order to make the correct
evaluation, there will be the use of the variance analysis so that all the deviations which are
involved can be ascertained. This will be helping the business in taking the corrective actions
for the future and all of these aspects will be covered in the below-presented report.
a)
In any organization there are certain aims and objectives which are required to be attained
and the most important among all is to increase the revenue and income of the business. In
order to fulfill this requirement, there is a need for an appropriate plan which is available in
the form of a budget (Cardoş, 2014). The café is involved in the foodservice and that also
needs to be manage for which the budget is made. There are various objectives which are
involved with this process and they are as follows:
 The main objective of the budget is to make the projections in relation to the revenues and
expenses which are involved. With the help of this, the proper management of the
activities will be performed which will help in gaining higher earnings.
 The estimates which are required to be attained will be the help of the budget as the
actions will be performed accordingly (Schick, 2014).
 The budget and actual values will be compared with one another by which the deviations
among them will be identified. The causes of the deviations will be identified and that
will help the management in taking the corrective actions for the coming period.
 With the help of the budget, it will be possible to improve the performance as there will
be a proper target which will be set and the working will be done accordingly.
b)
The variance analysis is the technique by which all the deviations which are involved in the
business among the budgeted and actual performance are determined. This is necessary to be

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performed so that the budget can be evaluated and it can be determined that the budgeted
results have been attained or not. For the undertaking of the same, there will be a calculation
of the differences which are present among the budgeted and actual values (Yahya-Zadeh,
2012). The identified deviations will then be used to analyze the reasons for the deviations
which are involved. The reasons will be understood and then the management will be
defining the steps which will be taken to eliminate them and improve the overall performance
in the coming period.
The calculation has been made in this respect and in that revenue and expense variances have
been calculated which will be useful in taking the required actions.
Particulars PLANNING ACTUAL Variance F/U
Budgeted meals quantity 20000 18000 2000 U
Revenues (£5.00q) 100000 90000 10000 U
Expenses:
Raw material (£2.50q) 50000 45000 5000 F
Wages and salaries (£5 500+£0.25q) 10500 10000 500 F
Utilities (£2 500 + £0.05q) 3500 3400 100 F
Facility rent 5000 5500 -500 U
Insurance 2800 3200 -400 U
Fuel 2500 2800 -300 U
Total expenses 74300 69900 4400 F
Net Operating Income 25700 20100 5600 U
 The actual quantity of meal which is provided is less than the budgeted by 2000 and this
may because of the decline in the number of tourists visiting the place. If they will be less
than the café will be facing the decline in quantity.
 Another reason could be the decline in the quality aspect. It is possible that the café is not
providing the same quality as of earlier and due to this less people are availing the service
provided by it.
c)
The variance analysis has been performed and all of the differences have been identified.
There are various such areas in which the performance is not as per the plan and the
management will be required to take the actions in that respect. There are certain areas that
are of concern for the management and the most important among them is the revenue that is
made by the company (Sponem and Lambert, 2016). It can be noted that the quantity of the
meals which has been budgeted is not achieved and there is an unfavorable variance which

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has been identified, The sales quality has declined by the 2000 units and due to that, the
revenue has reduced by £10000. This is an adverse condition for the business as by that the
overall income of the company will be affected. This will be required to be considered by the
management to improve the condition of the business in the upcoming months.
In addition to this, the analysis has also been carried in relation to all expenses. It can be
noted that the variance for several expenses is unfavourable and they will be of concern to the
management. The facility rent that was budgeted amounts to £5000 but in actual £5500 is
spent which is higher. This will lead to the rise in overall expenses and so it is considered as
adverse for the business (Hagel, 2014). In addition to this other costs such as insurance also
exceeded that budgeted value and there is an increment of £400 with this. The amount which
is increased in the total cost due to fuel amounts to £300. All of these are the measures of
concern for the company as the expense which is made is increasing and there is a negative
impact which will be made.
There is a decline in various expenses and due to that the total amount of spending which is
made has declined but it will not be of benefit to the business. This is because of the decline
in the sale quantity and the revenue which is also reduced with less volume. The overall
income which is made in the company is showing the reduction and that will act as the major
concern. The main aim of the business is to increase the earning but the same in the given
case is declining and that needs to be managed.
All of these concerns will be considered and then the decisions will be made on that basis.
The further plan which will be made will be incorporating the deviations so that the situation
can be made better in all the ways.
d)
The fleet highlands café is required to take various measures by which they will be able to
manage sustainability and profitability in the long run. For this, the evaluation has been made
and all the incorporated variances have been determined. It is identified that the expense is
increasing and so the proper actions will be taken by which the control can be established on
them. There is a reduction in sales also and that needs to be boosted.
In order to make this possible the appropriate offers will be provided to the customers by
which they will be attracted and the overall increase in the sales will be made. There will be a

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special concern which will be paid on the quality of the food and services which are provided
(Rui, 2012). With the good quality, the customers will be attracted and this will increase the
revenue. The profitability of the business will be improved by the undertaking of this step.
This will also ensure that the customers are satisfied with the services and products that are
provided to them. The satisfied customers are the biggest asset for any business and they will
be receiving their loyalty. By this, sustainability will be ensured as the consumers will not
switch from the company and will avail of its services for a long duration.
There will be an undertaking of the marketing with the online means and by that, it will be
ensured that the company and its services are in notice of all and people are aware of them. In
the global environment, there is high use of technology and by using online means it will be
possible for the company to reach the population at large scale (Ferasat, 2018). They will be
able to bring more people and as the services are provided to tourists so their needs and
requirements will also be considered. There will be proper identification of the preferences of
tourist and then the services will be planned accordingly. This will also be ensuring customer
loyalty and the business will be managed in the most profitable and sustainable manner.
Conclusion
The report considers all the important aspects and information in relation to the budgets and
their objectives. The main goals with which the budgeting is undertaken by the company
have been identified and all of that is explained in an adequate manner. There is the
consideration of the budgeted and actual values and with the help of that variance analysis
has been performed which helped in ascertaining the deviations which are incorporated in the
process. The main aspects and areas which are of major concern for the company have been
identified so that the improvement can be made appropriately. The last part consists of the
actions which will be taken by the company to make the business profitable and also
sustainability has been ensured.

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References
Cardoş, I.R. (2014) New trends in budgeting–a literature review. SEA–Practical Application
of Science, 2(04), pp.483-489.
Ferasat, K. (2018) Five Tactics to Create a Sustainable Restaurant Business. [Online]
Available at: https://gbr.pepperdine.edu/2010/08/2009-student-paper-winner/ [Accessed 2
April 2020]
Hagel, J. (2014) How to better connect planning, forecasting, and budgeting. Journal of
Accountancy, 217(4), p.20.
Rui, K.O.N.G. (2012) Budget Management Problems Involved in Geological Institutions and
some Countermeasures. Natural Resource Economics of China, (6), p.20.
Schick, A. (2014) The metamorphoses of performance budgeting. OECD Journal on
Budgeting, 13(2), pp.49-79.
Sponem, S. and Lambert, C. (2016) Exploring differences in budget characteristics, roles and
satisfaction: A configurational approach. Management Accounting Research, 30, pp.47-61.
Yahya-Zadeh, M. (2012) Comprehensive variance analysis based on ex-post optimal
budget. Academy of Accounting and Financial Studies Journal, 16, p.65.

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