Individual Coursework: Fleet Highlands Cafe Budget Analysis Report

This report provides an executive summary of the budgeting practices at Fleet Highlands Cafe. It begins by outlining the objectives of preparing a budget, emphasizing its role in resource allocation and performance evaluation. The report then presents a detailed variance analysis, comparing budgeted and actual figures for revenue and expenses. The analysis reveals adverse variances in revenue and several expense categories, including facility rent, insurance, and fuel. The management's concerns are highlighted, focusing on the need to increase revenues and control costs. The report concludes by suggesting strategies for maintaining profitability and sustainability, such as implementing new marketing strategies, controlling material and wage costs, and negotiating lower facility rents. The report uses variance analysis to identify areas for improvement and provides recommendations for future financial planning.

INDIVIDUAL
COURSEWORK

EXECUTIVE SUMMARY
The report will reveal about the budgeting and concepts and techniques used in
budgeting. Report is based over Fleet Highlands and will provide about the objectives of
preparing budgets. Variances are seen in the budgeted and actual figures and management is
paying attention for reducing the variations in budgets.

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................3
FLEET HIGHLANDS CAFE..........................................................................................................1
a) Objectives of preparing budget for the Fleet Highlands Cafe.................................................1
b) Report showing revenue and spending variances for the march.............................................1
c) Variances of concern to the management................................................................................2
d) Maintaining the profitability and sustainability for going forward.........................................4
REFERENCES................................................................................................................................5

FLEET HIGHLANDS CAFE
a) Objectives of preparing budget for the Fleet Highlands Cafe.
Budgeting refers to the process in which organisation makes forecast on the future income
and expenditures of the company. Budgets are prepared by the management in planning process
as the spending plan to be followed by the organisation. Budgets are prepared separately for each
department of the entity estimating the cost and revenues. On the basis of all the budget of
departments one master budget is prepared. There are various types of budgets that are prepared
by the organisation to provide for different operations such as zero based budgets, activity based
budgets, cash budgets and such other budgets. Budget allows the allocation of resources between
the different department and cost operations. Common objective of creating budgets is of using it
as basis for judging the employees’ performance with the use of variance analysis from budget.
Budget is prepared by the Fleet Highlands Cafe for efficient allocation of the resources
among various departments of business.. This is the main objective behind preparing the budget
by Cafe. Budgets are prepared basically for providing the model of business performance over
the year. Budget is prepared by the Cafe after analysing the future costs and expenditures by
making projections. These projections are made by the management after making study of the
previous budgets (Isnaeni and Widayanti, 2019). Cafe uses budget of previous years for making
the budget of current year. it is a traditional budgeting method in which adjustments related with
the cost and expenses are made after analysing the trends. These adjustments generally include
relating to the inflation, demand and supply and other factors that may affect the budget and its
operation.
Cafe has prepared the budget for setting goals for future actions. It allows the cafe to make
effective allocation of the resources among the different department and activities. It enables the
company to frame strategies for accomplishing the desired goals and objectives of the business.
It enables the management to monitor and control the operations of business by giving a budget
to effectively utilise the available resources. it is the spending plan of cafe that keeps the costs
and expenditures under control and prevents overspending of the costs.
b) Report showing revenue and spending variances for the march.
Variance analysis Budgeted Actual Variances
Budgeted meals quantity 20000 18000 18000
Revenues 100000 90000 90000 10000
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Expenses:
Raw material (£2.50q) 50000 45000 45000 0
Wages and salaries (£5 500+
£0.25q)
10500 10000 10000 0
Utilities (£2 500 + £0.05q) 3500 3400 3400 0
Facility rent 5000 5000 5500 -500
Insurance 2800 2800 3200 -400
Fuel 2500 2500 2800 -300
Net Operating Income 25700 21300 20100 1200
The budgeted report is prepared by the organisation for making the effective utilisation of
the resources. Budget is prepared by the Cafe about the production of goods and services.
Variance analysis refers to quantitative investigation of difference between actual and planned
behaviours. The analysis is used for maintaining the control over business. variance analysis is
conducted by to become proactive for achieving the business targets, it also helps the business in
mitigating and identifying the potential risks that eventually builds the trust among team
members for delivering what are planned (Khoiriyah and Shauki, 2019). In the present case Cafe
has made the report for the month. Variance analysis provides the management with the areas
that are showing major variances between the budgeted and actual figures.
It could be analysed from the report that budgeted sales level of company are 20000 where
the actual sales is of 18000 units there is variance of 2000 units. Budgeted revenues are 100000
where the actual revenues earned by the cafe are 90000 there is an adverse variance of 10000 due
to the lower sales of products. Variances are seen in the indirect expenses of the cafe and ne
operating income has shown negative variances. There are variances in income of 1200 that are
high. The variances in income are considerably high. Spending of the company is equal to the
budgeted figures in respect of the cost of direct materials, labour and utilities expenses. Cafe is
required to focus over the variances that are incurred in the revenues and expenses. On the basis
of these variances strategies are framed by the organisation for reducing the variations between
the actual and budgeted figures.
c) Variances of concern to the management.
Variance analysis Budgeted Actual Variances %
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Budgeted meals quantity 20000 18000 18000
Revenues 100000 90000 90000 10000 -10%
Expenses:
Raw material (£2.50q) 50000 45000 45000 0 0%
Wages and salaries (£5 500+
£0.25q) 10500 10000 10000 0 0%
Utilities (£2 500 + £0.05q) 3500 3400 3400 0 0%
Facility rent 5000 5000 5500 -500 -10%
Insurance 2800 2800 3200 -400 -14%
Fuel 2500 2500 2800 -300 -12%
Net Operating Income 25700 21300 20100 -1200 -5%
In the variance analysis management identifies the different items of the budget that are
showing variations. Variance analysis is made at the end of period for identifying the variations
between the actual and budgeted figures. From the budgeted and actual figures of Cafe it could
be evaluated that the sales of the company has shown adverse variance. This requires the
management to pay attention towards the sales and revenues. There is negative variance of 10%
in the actual revenues from the budgeted figures (Tan and Low, 2017). The revenues are required
to be increased by the management by adapting appropriate promotional strategies. These
promotional strategies will increase the sales and revenues that will reduce the variances in
revenues of cafe.
As the expenses are budgeted considering the total sales and production of 20000 units. Cost
includes both the budgeted and fixed costs in some of the expenses. Variances for the expenses
will be measured considering the budgeted figures at 18000 units. This will make the comparison
of costs at equal scale. It could be analysed from the variances that the cost of raw material have
not shown variances as it is charged at fixed variable rate. the prices of the per unit cost of raw
materials have not increased and according to the actual figures it has charges the same rate that
is budgeted for 18000 units. On the other wages are variable and salaries are fixed of the labour.
Wages and salaries are also calculated on the basis of 18000 units. This has also not shown
variances as the actual cost of wages is salaries are equivalent to the budgeted figures. This
expense has not shown variances between the actual and budgeted figures (Style, 2020). Utilities
expenses budgeted of the company are 3500 for 20000 units on considering at budgeted figures
of 18000. Costs of utility expenses are equal to the budgeted figures. Company is not required to
pay much attention over these variances.
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Other fixed expenses have shown major variances that require the management to pay more
attention over these costs. Facility rent has increased by 10% which is adverse variance. The
increase in facility rent has been increased affecting the budgeted figures. Insurance charges have
also increased from budgeted 2800 to actual amount of 3200. There is a increase of 14% in the
insurance expense of the month. The variances are adverse between the actual and budgeted
figures. The insurance charges have shown major variation among all the expenses incurred by
the organisation. In the fuel expenses also there is a negative variance of 12% from the budgeted
figures. The increase in fuel expenses has shown variations from the budgeted figures.
Management is required to pay attention particularly towards the revenues and direct costs
and the fuel charges. These are the variances that could be controlled by the management by
controlling the costs and attention is to be paid by management over these variances. Further
attention is to be paid over controlling facility rent.
d) Maintaining the profitability and sustainability for going forward.
Fleet Highlands are required to focus over implementation of new marketing and
promotional strategies that will increase the revenues of company. Increase in revenues will help
in reducing the variances in profit or income level. It has to maintain the costs of materials and
wages so that the variances are not seen in these costs. Also, the utility expenses can be
controlled by the management using cost efficient strategies. Facility rent has been increased for
the month from the budgeted figures. Management can make negotiation for decreasing the
amount of rent and bringing down to reasonable levels (Perkins, 2019). Facility rents could be
reduced to an extent by making negotiations. Insurance expense could not be controlled and are
required to be paid at cost. fuel charges are paid according to the use of power. Fuel charges
could be controlled by making use of more efficient technologies that consumes less fuel.
These steps will help the management in reducing the variances between actual and
budgeted figures. Reducing variances will enable the company in earning the budgeted profit
levels. Lower levels of variances move the organisation towards success and profitability.
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REFERENCES
Books and Journals
Perkins, T.C.N., 2019. Budgeting, target setting and variance analysis: the case of two logistic
companies (Doctoral dissertation).
Style, A.P.A., 2020. Budgeting, Variance Analysis, and Performance Evaluations SLP 4. Order.
Tan, B.S. and Low, K.Y., 2017. Budgeting Practice in Singapore–An Exploratory Study Using a
Survey. Asia Pacific Management Accounting Journal. 12(1). pp.77-103.
Isnaeni, A.A.G.A. and Widayanti, A., 2019. Production Cost Budgeting and Evaluating using
Android Device Application. International Journal of Engineering & Technology. 8(1.9).
pp.486-490.
Khoiriyah, M. and Shauki, E.R., 2019, July. Evaluation of Budgeting System Using Activity-
Based Budgeting: A Case Study at PT X. In Asia Pacific Business and Economics
Conference (APBEC 2018). Atlantis Press.
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