London Docks Cafe: Budgeting, Variance Analysis, and Sustainability

This coursework report delves into the financial performance of the London Docks Cafe, focusing on its budgeting practices and their impact on the business. The report begins by outlining the objectives of budgeting, such as estimating income and expenses, acting as an action plan, enabling comparison of actual and budgeted performance, and aiding in forecasting. It then discusses the benefits of a robust budgetary process, emphasizing risk assessment and proactive financial management. A variance report is presented, comparing budgeted and actual figures for various financial aspects, including revenue, raw materials, wages, utilities, and operating income. The report identifies key areas of concern, such as declining sales and profit margins, and analyzes the implications of these variances. Finally, it explores the concepts of profitability and sustainability, emphasizing the importance of balancing short-term gains with long-term financial health and customer satisfaction. The report concludes by highlighting the significance of budgeting and the need for the London Docks Cafe to focus on both profitability and sustainable practices for long-term success.

INDIVIDUAL
COURSEWORK

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Objectives of budgeting and benefits from robust budgetary process.........................................3
Variance report............................................................................................................................4
Area of concern............................................................................................................................5
Profitability and sustainability.....................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................1

INTRODUCTION
Budgeting is an important element of the organization wherein they prepare budget in
advance concerning the estimated expense and revenue. it acts as a base from which the
companies measure and evaluate their actual performance. It enables the companies to identify
the variances and then taking corrective actions accordingly. This report will discuss about the
concept of budgeting and its objective. A variance sheet with a consideration aspect will also be
included in the report. Lastly, this report ends with the concept of profitability and sustainability.
MAIN BODY
Objectives of budgeting and benefits from robust budgetary process
Budgeting:
It refers to a process on the basis of which a plan is being created regarding the spending
of money. As this plan is created in advance so it would be easy to determine that whether the
company is having enough money to do the things or not (Nikulina, 2019). In simple words it
refers to a process by which the expenses will be balanced with the income.
Objective:
Estimation of income and expenses:
Preparation of budget enable the company to have an estimation of income and expenses
for a specific period. It also enables the company to analyse the financial position at the end of
the period.
Action plan:
It also act as an action plan and guide that lead the company to achieve the targeted
financial position and manage the expenses along with generating the income.
Comparison:
It is one of the main objective associated with the preparation of budget. As the budget is
prepared in advance so it helps the company to measure and analyse the actual performance with
the budgeted one (Bayramov, 2021). This means that it acts as a mode of standard against which
the actual performance is being measured. Likewise, it also act as a base that can mitigate
deviation.
Forecasting and guidance:

Budget is also utilized by the company in forecasting the future or the strategies related
with future. It also assists the guidance to utilize the funds (Yılmaz, 2018).
Robust budgeting process and benefits:
It refers to a process wherein the risk is assisted at the income level and they are started
treated at that stage. As under this budgeting the risk are analysed at the initial stage so this will
directly help and lead the London Docks Café in terms of meeting and mitigating any futuristic
loss or expenses. As the main objective of the budgeting is to have an analysis and prediction of
expenses and the income so with the inculcation of robust budgeting the café will be benefit in
the early stage in terms of analysing the expenses and the losses and taking adequate and
corrective action in advance.
Variance report
Particular Budget Actual
Quantity 20000 18000
Revenue 100000 90000
Raw material -50000 -45000
Wages and
salary -10500 -10000
Utility -3500 -3400
Facility rent -5000 -5500
Insurance -2800 -3200
Fuel -2500 -2800
net operating
income 25700 20100
Here ,
budgeted material quantity is 20000 units but in actual we have used just 18000 unit which is
2000 less than standard
Therefore change in budgeted v/s actual is = 20000-18000/20000 we get 10% in changes
Also, budgeted revenue is (20000*5) i.e.100000 whereas Actual revenue is 90000 therefore
10% changes in revenue ( decrease)
As budgeted raw material cost is 50000 whereas Actual raw material cost is 45000 therefore
10% changes in cost( decrease)
Here budgeted wages and salary is 10500 whereas Actual wages and salaries cost is 10000
therefore 4.71% changes in cost( decrease)
As budgeted utility is 3500 in which fixed component is 2500 and variable is 1000 whereas
Actual budgeted utility cost 3400 in which fixed component is 2500 and variable is 900

therefore 10% changes in cost( decrease)
As budgeted insurance cost is 5000 whereas Actual insurance cost is 5500 therefore 10 %
changes in cost( increase)
Here budgeted fuel cost is 2500 whereas Actual raw material cost is 2800 therefore 12%
changes in cost( increase)
As budgeted net operating income is 25700 whereas Actual net operating income is 20100 therefore
21.78% changes in revenue (decrease)
Area of concern
The area of concern with regard to the above table includes the quantity of product that is
being sold. This means that as the budgeted and planned quantity was 20000 but the actual sold
was 18000. This means that 2000 products are less sold which is approximately 10% less sales
value. As the products are less sold, so this will directly raise the concern towards the decrease in
profit percentage. This means that the planned profit was 100000 but with the selling of less
products the percentage and the amount of profit also decline to 90000. Thus, it is also a point of
concern that along with declining sales the percentage of profits are also being declined which is
needed to be improvised by adopting suitable steps from the café. However, in case of expenses
concerning with the raw material, labour cost, utilities all decline with the decline in the quantity
of the product. On the other hand, other expenses including insurance cost and fuel cost raised by
10 and 12% which is matter of concern and need to be considered and mitigated. Lastly, as the
operating income decline from 25700 to 20100 which clearly shows that the performance of the
café in terms of serving the customer and meeting the sales is low and as a result of that the
profit percentage decline. Therefore, it would not be wrong to said that the main area of concern
is the sales and the profit which is very essential to be raised so that the café would survive its
business.
Profitability and sustainability
It is one of the important concept associated with the business. As per this concept
profitability refers to the profit or the revenue that is being earned from the performance of the
business operation. This means with the performance of the business activities the revenue that is
being generated is termed as profitability (Whetman, 2018). In simple words profitability refers

to the terms which includes the profits that the business earned with the performance of its
business operation along with management of its expenses.
On the other hand, sustainability refers to maintenance of profit for the long run. This
means that although it includes earning and raising of profit but at the same time it would not be
for the short terms or the period but it will be related with the long run. In simple words
performance of business operation by the company in such a manner that along with generation
of profit for the meeting of current need, the future and long term profit generation is also be
performed.
It is very essential for every company including the London Docks Café that there would
be a balance and combination of both the concept. This means that the café would earn profit but
in such a manner that along with present need or the profit the future and long term generation of
profit would also be implemented. For this the café can perform and adopt the practice of market
research that with the detailed market analysis it can plan its strategies in such a manner that it
can get benefitted in the long run too. Focus on social trust can also be a good practice that can
benefit the café not only in the present meeting of requirement but at the same time the future
needs and requirement would also be meet. This means that by having a clear focus over the
customer and the society the café can easily grab the customer for the long term.
Innovation is also a good strategy concerned with achievement of profitability and
sustainability. This is because through the concept of innovation the London Docks café can
easily meet the future changes along with raising and attracting the customers towards the café.
Be accountable and constantly improvement nature and concept would also assist the café in the
attainment of both the terms. This means that being accountability would create the trust among
the customer and helps in building long term relation (9 Tips for Growing a Sustainable
Business, 2021). Likewise, a concept of continuous improvement will lead the café to have to
attain the sustainability wherein along with generating the profits the future and long term profit
generation would also be attain by the café.
CONCLUSION
From the above report it is concluded that budgeting is an essential part of every
organization that enable them to compare their actual performance with the budgeted and

estimated one. This concept enables them to have an analysis of the variances. Likewise, from
this report it is also understood that along with focussing on the profitability it is equally
important to have a focus over the concept of sustainability so that the London Docks café can
grab future benefits too.

REFERENCES
Books and journals
Bayramov, S., 2021. PROGRAM BUDGETING AS A TOOL OF IMPROVING THE
EFFICIENCY OF BUDGET EXPENDITURES. Economic and Social Development:
Book of Proceedings, pp.169-175.
Nikulina, S.N., 2019. Innovative Direction of the Budgeting System Development. In Paper
Materials of the 1st China and CIS Countries Scientific Readings" Urbaniza-tion Level,
Rural Labor Transfer and Economic Growth in the XXI-st Century: Economic Models,
New Technologies, Management & Marketing Practices and Mutual
Collaboration" (pp. 404-418).
Whetman, L.L., 2018. The impact of sustainability reporting on firm
profitability. Undergraduate Economic Review. 14(1). p.4.
Yılmaz, F., 2018. Budgeting as a Tool for Sustainable Development. In Handbook of Research
on Supply Chain Management for Sustainable Development (pp. 42-60). IGI Global.
Online references
9 Tips for Growing a Sustainable Business., 2021. [Online]. Available through <
https://www.getsmarter.com/blog/career-advice/9-tips-for-growing-a-sustainable-
business/>
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