Analysis of Perfect Parties' Performance Budget and Variances

This report undertakes a comprehensive analysis of Perfect Parties' budget performance, focusing on the variances between the static and flexible budgets. The analysis delves into the company's revenue and cost structures, identifying key areas of deviation from the planned budget. The report examines the reasons behind these variances, particularly the impact of changes in activity levels on revenue and expenses. It provides specific recommendations for cost control, revenue generation, and improved budgeting practices. Furthermore, the report incorporates market research on the party planning industry, offering insights into competitor analysis and the broader market trends. The findings are presented in APA format, supported by relevant references, providing a detailed assessment of Perfect Parties' financial performance and strategic positioning.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Analysis of the Budgets and its Activities...................................................................................2
Potential Reason and Recommendations.....................................................................................4
Market Research on Party Planning Industry..............................................................................5
Conclusion.......................................................................................................................................5
Reference.........................................................................................................................................6

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Introduction
The main purpose of this assessment is to analyse the fixed and flexible budgets which is
prepared for Perfect Parties which is engaged in the business of organising parties for the
customers. The assessment would be analysing the variances which are present between the
actual results and the flexible budgets which is prepared by the management of the company
(Bragg, 2014). The assessment would be comparing the results of the business with other
companies which belong to the same industry.
Discussion
Analysis of the Budgets and its Activities
Planned Budgets are prepared by a business for the purpose of forecasting and planning
for anticipated revenue and expenses for the business during the period. The management of
Perfect Parties has formulated a planned budget considering the number of parties for the period
which is considered to be 80 parties. On the basis of this number of parties, the management has
based the revenue of the business and also all the costs which is incurred by the business
(Sandalgaard & Nikolaj Bukh, 2014). The main source of revenue from the fees which is
collected from the client for the parties. The major expenses which is anticipated by the
management of Perfect Parties are food expenses, supplies, rent, wages and salaries of personnel
and depreciation of the equipment used by the business.
The actual performance of the business for the period comprise of 92 parties and
therefore the cost and revenue figures also change and do not conform with the budgets which
was set by the management. The main reason which can be identified for such variances is due to
the change in the activity level. Therefore, in order to make effective comparison between the

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planned budget and the actual performance, a flexible budget needs to be prepared by the
management on the basis of which the revenue and costs of the business would also change.
The flexible budget shows that the actual revenue which is generated by the business is $
40,000 which is lower than the budgeted revenue at the same activity level. The budgeted cost
for food is shown to be $ 8,280 which is lower than the actual results and therefore the same is
unfavourable. In the case of party supplies, the management has been able to save costs as actual
expenses is lower than the budgeted expenses (Noreen, Brewer and Garrison, 2014). The
management of the business has also saved significant amount in rent which is actually lower
than which was actually anticipated. In an overall estimate, it is clear that the total expenses
which is incurred by the management of Perfect Parties is slightly under the control of the
business (De Jong, van Beek & Posthumus, 2013). However, the revenue which is generated by
the management of Perfect Parties is shown to be significantly low than what was anticipated by
the management. This is mainly due to the high costs which are incurred by the business and also
the lower level of revenue generation. This shows that the management has not been able to
effectively follow the plan which was devised and therefore there exist variances which are
related to activity and spending.

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The budget which is prepared on flexible budget method or which is restated shows that
the management has not been able to achieve the targets which was set previously which has
resulted in variances.
Potential Reason and Recommendations
The main reasons which can be identified as to the cause of the variance is the high costs
which is incurred by the business on food expenses and wages and salaries of workers. In
addition to this, the revenue which is generated by the business also does not meet the
performance target which was set by the management of Perfect Parties.
The recommendations which can be suggested to the management of Perfect Parties are
listed below in point form:
 The management of the company needs to control the costs of the business especially for
food expenses and wages and salaries for workers and administration staff.
 The management need to focus on generating more revenue by charging appropriate fees
considering the costs of the business (Becker et al., 2016).
 The management needs to engage in an investigation as to the probable causes of the
variances which has taken place with respect to the budget.
Market Research on Party Planning Industry
The party planning businesses which are operating in US has experienced a boom in the
social events which are taking place which can be a birthday bash, homecoming party, wedding
treats, fundraiser. The business has experienced a growth of 3.9% to reach revenue of $5bn in
2017 considers the last five years period (Ibisworld.com., 2019). The competitors of the business

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of Perfect Parties needs to considers such competitors as they are potential threat to their
revenues. The costing structure of the competitors would be similar to the business of Perfect
Parties as the line of work and material required are same and the rest depends on the
management of the same.
Conclusion
The above discussion shows that the business of Perfect Parties has not been able to meet
the performance targets which was set by the management as per the actual results. The
management needs to undertake corrective measures so that such variances can be settled. The
analysis also shows the different items which have significant high costs which are more than the
anticipation of the management. The discussion part also shows a review of the market of party
planners.

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Reference
Becker, S. D., Mahlendorf, M. D., Schäffer, U., & Thaten, M. (2016). Budgeting in times of
economic crisis. Contemporary Accounting Research, 33(4), 1489-1517.
Bragg, S. M. (2014). Budgeting: The Comprehensive Guide. AccountingTools.
De Jong, M., van Beek, I., & Posthumus, R. (2013). Introducing accountable budgeting. OECD
Journal on Budgeting, 12(3), 1-34.
Ibisworld.com. (2019). Party & Event Planners in the US. Industry Market Research Reports,
Trends, Statistics, Data, Forecasts . [online] Available at:
https://www.ibisworld.com/industry-trends/specialized-market-research-reports/
consumer-goods-services/personal/party-event-planners.html [Accessed 15 Feb. 2019].
Noreen, E.W., Brewer, P.C. and Garrison, R.H., 2014. Managerial accounting for managers.
New York: McGraw-Hill/Irwin.
Sandalgaard, N., & Nikolaj Bukh, P. (2014). Beyond Budgeting and change: a case
study. Journal of Accounting & Organizational Change, 10(3), 409-423.