Fleet Highlands Cafe: Budgeting, Variances & Financial Analysis

This report analyzes the budgeting and variance analysis for Fleet Highlands Cafe, focusing on the month of March. It identifies the objectives of preparing a budget, calculates revenue and spending variances, and highlights variances of concern to the management. The analysis reveals that the café experienced negative variances in areas such as facility rent, insurance, fuel costs, net operating income, and overall revenues, while positive variances were observed in raw material costs, wages, and utilities. The report concludes by providing recommendations to the café's management on how to maintain profitability and sustainability, including minimizing high expenses, focusing on revenue-generating activities, and regularly evaluating variances. The document emphasizes the importance of budgeting and variance analysis for effective financial management and problem-solving within the company.

Managing financial and
Human Resources

EXECUTIVE SUMMARY
The project report summarize about role of budget and variances for companies. Under
the report, different kinds of variances are computed which are presenting negative outcome for
above café. As well as report abstracts that café needs to implement effective suggestions in their
strategies so that they can overcome from negative variances.

Contents
EXECUTIVE SUMMARY.........................................................................................................................2
INTRODUCTION.......................................................................................................................................4
MAIN BODY..............................................................................................................................................4
(a) What is the objective of preparing a budget for Fleet Highlands Café?.......................................4
(b) Prepare a report showing the company’s revenue and spending variance for March?........................5
(c) Which variances should be of concern to management? Explain.......................................................7
(d)Advise the Fleet Highlands Café on what they need to do to maintain their profitability and
sustainability going forward....................................................................................................................8
CONCLUSION...........................................................................................................................................9
REFERENCES..........................................................................................................................................10

INTRODUCTION
This is essential for companies to manage their financial and non financial resources in an
effective manner (Junita, 2018). In order to do this, budgets are too crucial which are prepared on
the basis of past financial information. By help of budgets, companies become able to know
variances in actual and estimated values. The project report is based on a company that is Fleet
highlands café. This company prepares meals for tourists and citizens in its kitchen located next
to the local airport. The report covers detailed information about objective of preparing budget
for this company as well as variances are also calculated in the report.
MAIN BODY
(a) What is the objective of preparing a budget for Fleet Highlands Café?
Budget- A budget is a defined as a financial plan, typically for one year. Plan revenues
and income, capital amounts, expense and expenses, properties, liabilities, and cash flows
may also be considered (Sponem and Lambert, 2016). Companies, governments, families and
other groups use it to communicate in tangible words specific business strategies or incidents.
A budget is the amount of money allotted for a particular reason, outlines planned costs and
recommendations for how to fulfill such expenditures. This may have a spending surplus, a
fund for usage in the future or a deficit in which investment meets income. Each company
prepares budget for a particular time period and it has below mentioned objectives which are
as follows:
 Provide structure- A budget is particularly useful to provide advice on the path to
be followed by an organization. It therefore sets the basis for the next moves. A
CEO will be better served that an organization with no clear strategy be given a
budget. For example, if the CEO completely removes the budget and then reviews
it again next year, a budget does not have any structure. And when management
continuously relates to the expenditure offers a comprehensive framework and
assesses the efficiency of the staff according to its goals. Such as in the above
Fleet highlands café, they prepare budgets which help them in order to prepare a
proper structure of their organization.

 Predict cash flows- In businesses with fast-growing, strong seasonal revenues or
erratic selling trends, a budget is very useful. Such companies have a hard time
predicting how much cash they would have in the near term, which contributes to
daily financial crises (Slyter 2016). A budget tends to forecast cash flows which
prove more and more volatile in the future. Throughout the next months of the
year, offering the cash flows a vision is a rational budgetary objective. In the Fleet
highlands café, they produce different types of budgets in order to make
prediction of cash flows for a particular time period.
 Measuring performance- A specific purpose of budget creation is to make it the
basis for evaluating employee efficiency by adding expenditure variances. It is an
unrealistic aim, as workers tend to adjust the budget to better meet their specific
objectives (known as budgetary shortcoming). In the Fleet highlands café, they
produce budgets in order to measure their actual performance which becomes
possible by making comparison of actual outcome with planned values.
So these are some main objectives of preparing budget for above Fleet highlands café. As they
manage their financial resources in an effective manner by help of budgets.
(b) Prepare a report showing the company’s revenue and spending variance for March?
Variance analysis- Variable analysis is an investigation in the budgeting or administration
accounting regarding differences from actual actions or expected behavior (Babić and Rotach,
2018). The primary issue here is how the disparity between real and expected action reveals how
organizational success is influenced. In the aspect of above Fleet highlands café, calculation of
variances is done below in such manner that is as follows:
Particulars
Plannin
g Actual
Varianc
e
Adverse
or
favorabl
e
Budgeted meals quantity 20000 18000 2000 A

Revenues (£5.00q) 100000 90000 10000 A
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 A
Insurance 2800 3200 400 A
Fuel 2500 2800 300 A
Net Operating Income 25700 20100 5600 A
Analysis- The above mentioned table shows that most of variances are showing negative
outcome as variance is showing adverse result. As well as there are only three variances which
are presenting positive outcome which are related to expense. Herein, below classification of
variances is done below which are positive and negative:
Positive variances:
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
Negative variances:

Facility rent 5000 5500 500 A
Insurance 2800 3200 400 A
Fuel 2500 2800 300 A
Net Operating Income 25700 20100 5600 A
Budgeted meals quantity 20000 18000 2000 A
Revenues (£5.00q) 100000 90000 10000 A
(c) Which variances should be of concern to management? Explain
In the above part of report different types of variances are calculated and most of them
are presenting negative results. Herein below list of those variances is mentioned in such manner
that is as follows:
Expenses:
Facility rent- Fleet highlands café expected that in month of March the expense of rent will be of
5000 pounds but in actual they faced expense of 5500 pounds. As a result they faced additional
expense of 500 pounds. This aspect needs to be considered by management of café so that in
next month their expense can become lower.
Insurance- In the aspect of above café this can be find out that they expected cost of insurance of
2800 pounds but in actual cost occurred of 3200 pounds. Thus there is negative variance of 400
pounds. This is also need to be considered by above café.
Fuel- This is also a key aspect which needs to be concern with management. It is so because
expected cost of fuel was of 2500 pounds but in actual its cost was of 2800 pounds. As a result
they faced variance of 300 pounds.
Revenues:
 Net operating income- The expected value of net operating income was of 25700 pounds
but in actual the above mentioned café failed to generate income. In actual they gained

net operating income of 20100 pounds. As a result they faced negative variance of 5600
pounds. This variance needs to be considering to management of above mentioned café.
 Revenues- In the aspect of above café, it can be find out that their expected sales was of
100000 pounds but in actual their revenue was of 90000 pounds. Due to this they faced
negative variance of 10000 pounds. Hence, this variance also needs to be considered with
management of above café.
Budgeted meals quantity- In the aspect of above café, it can be find out that their Budgeted meals
quantity was of 20000 units but in actual their production was of 18000 units. Due to this they
faced negative variance of 2000 units. Hence, this variance also needs to be considered with
management of above café. They should try to focus on enhancing total volume of production so
that they can become able to meet the expected volume of production (Griffin and Larson, 2016).
(d)Advise the Fleet Highlands Café on what they need to do to maintain their profitability and
sustainability going forward.
On the basis of calculation and analysis of variances, above café needs to apply below
mentioned suggestions in their strategies which are as follows:
 They should try to minimize those expenses whose value is higher as compared to
standard values.
 Café should focus on those activities and operations which are linked with increasing
total value of revenues. If they will do so then their revenue variances will show positive
result.
 The management department of above café should try to eliminate those aspects which
are linked to making burden of total expenditure.
 The management department of café should make evaluation of variances at the end of
each month.

CONCLUSION
On the basis of above project report this has been concluded that it is essential for
companies to make budgets and computing value of variances so that issues can be solved.
Under the report different types of variances are calculated including revenue and expenses
variances. Report concludes that company’s performance is not as good in month of March as
their most of the variances are showing negative outcome. Thus they should apply above
mentioned suggestions in their operations and activities.

REFERENCES
Books and journal:
Junita, A., 2018. The effect of budget variances on the local government budget changes with
legislature size as moderator.
Sponem, S. and Lambert, C., 2016. Exploring differences in budget characteristics, roles and
satisfaction: A configurational approach. Management Accounting Research, 30, pp.47-
61.
Slyter, M.F., 2016. How well do hospitals budget operating results? The relationship between
budget variances and operating margin (Doctoral dissertation, The University of
Alabama at Birmingham).
Babić, K. and Rotach, M.W., 2018. Turbulence kinetic energy budget in the stable boundary
layer over a heterogeneous surface. Quarterly Journal of the Royal Meteorological
Society, 144(713), pp.1045-1062.
Griffin, B.M. and Larson, V.E., 2016. Parameterizing microphysical effects on variances and
covariances of moisture and heat content using a multivariate probability density
function: a study with CLUBB (tag MVCS). Geoscientific Model Development, 9(11),
p.4273.