Analyzing Budgeting & Financial Strategies: Coffeeville Company

This assignment provides a detailed analysis of Coffeeville Company, a food and beverage business, focusing on its budgeting and financial planning. It covers various aspects including the company's financial overview, the scope of budgeting, key components of a budget for small businesses, and the influence of political, economic, social, and technological factors. It also identifies internal factors impacting the budget, methods for team communication, budget monitoring techniques, and corrective actions for deviations. The document further discusses zero-based and top-down budgeting approaches, sales and wages budgets, fixed and variable costs, accounting software for the hospitality sector, and sources of information for accurate budgeting. Finally, it addresses actions for financial managers in case of project deviations. Desklib is your go-to resource for solved assignments and study materials.

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

Zero based budgeting is nothing but it is a way of preparation of budget from the initial point.The
zero based budget is prepared not on the basis of previous budget data instead it starts from zero
point.The main aim of zero based budget is to provide justification for every expenses before
claiming the same in the official budget and to curtail the cost were possible.There are several ways
to reduce the expense while preparing the budget based on zero based budget like for an instance
ask employees of the company what type of expenses they might have in future and analyse those
expense and figure out were to curtail those expenses and expenses which is incurred is not
necessary to be incurred in the business it can be axed from the budget. (Patriot software company,
2019)
In Zero based budgeting all the expenses which are accounted on the basis of actual expenses which
are to be incurred.In this zero based budgeting all expenses needs to be justified and explaining the
every cost that needs to be incur to generate revenue.There are also few steps which is to be
followed like:
 Identification of goals of the business
 Identification of new ways how to achieve goals.
 Identification of new process to fund the business. (Patriot software company, 2019)
Through zero based budgeting procedure one determine ,which expenses are incurred to attain
sales and helps in growth of business and benefits the company.As a small company one doesnot
have so much time to prepare budget from the scratch every time but few big companies might get
benefit from the preparation of zero based budget. (eFinanceManagement.com, 2019)
Top down budgeting
Top down budgeting is a budgeting process were the senior level management prepares the budget
for the corporate entity.The level of the budget is very high in top down budgeting.Once all the
figures are determines by the top level managers for the budget than the amounts are allocated to
the respective department.There is a layout for the preparation of top down budgeting which is
followed.
14.SalesBudget:
Sales budget is an estimation of future sales of a particular accounting period based on various
management judgement. It is an expectation of management to generate revenue in a particular
accounting period. It is generally done with an intention to set departmental goals, estimate the
requirement of production and operating level etc. The sales budget has an influence over the
operational budget of the company and the master budget of the company.
https://bizfluent.com/about-4699902-what-sales-budget.html
15.Wages Budget:
Wage budget is generally prepared by the management to estimate the outlay of expenditure
towards labour for a particular accounting year. It is generally prepared to estimate the total cost
that shall be part of prime cost of the company and the total cost of production that shall be
incurred during the year and accordingly compute the profit.

16:Fixed Cost
Three examples of fixed cost item includes rent of property, machinery, salary of workers or staffs
and insurance premium.
17:Variable Cost
Three examples of variable cost includes cost of raw material, cost of direct labour and cost of
electricity consumption.
Question 21:
The different accounting packages vailable for the hospitality sector are as follows:
 Zoho Books
 MARG ERP 9+ Accounting Software (Softwaresuggest.com, 2019)
 HDPOS Smart Accounts and Billing
 Vyapar-Accounting and Invoicing (Softwaresuggest.com, 2019)
Question 22:
The list of various sources of information that may help to prepare a more accurate budget are :
 Develop ways of estimating your expenses.
 List the estimated yearly expense totals of the absolute necessities of the organization.
 List the estimated expenses for things you'll need to actually conduct the activities of the
organization. (Community Tool Box, 2018)
 List estimated expenses for anything else the organization is obligated to pay or can't do
without (Community Tool Box, 2018)
 List estimated expenses for things which you aren't sure you can afford, but would like to do
 Add up all the expense items you have listed.
Question 25:
Actions to be taken as financial manager if there is a deviation from the project are:
 Checking of Internal Policies
 How much significant the variance is
 Control extent
 Checking of availability of fund.

References:
Community Tool Box. (2018). Planning and Writing an Annual Budget. Retrieved January 15, 2019,
from ctb.ku.edu: https://ctb.ku.edu/en/table-of-contents/finances/managing-finances/
annual-budget/main
eFinanceManagement.com. (2019). Zero Based Budgeting Meaning and Definition. Retrieved
January 15, 2019, from efinancemanagement.com:
https://efinancemanagement.com/budgeting/zero-based
International Budget Partnership. (2019). Budget Evaluation. Retrieved January 15, 2019, from
www.internationalbudget.org:
https://www.internationalbudget.org/why-budget-work/budget-evaluation/
Patriot software company. (2019). What Is Zero-Based Budgeting, . Retrieved January 15, 2019, from
www.patriotsoftware.com:
https://www.patriotsoftware.com/accounting/training/blog/what-is-zero-based-budgeting-
example-process/
Softwaresuggest.com. (2019, January 8). Best Accounting Software for Hospitality Businesses.
Retrieved January 15, 2019, from www.softwaresuggest.com:
https://www.softwaresuggest.com/accounting-software/hospitality-industry