University Finance Module: Twin Rivers Cafe Budget Analysis and Report

This finance report analyzes the budget of Twin Rivers Cafe, comparing planned and actual figures for July 2018. The report identifies variances in revenue, expenses (raw materials, wages, utilities, facility rent, insurance, and fuel), and net operating income. The analysis reveals unfavorable variances due to lower activity levels (fewer meals served) and higher expenses. The report also highlights concerns about facility rent, fuel, and insurance expenses. It suggests strategies for improvement, including policy formulation, performance monitoring, and resource allocation to achieve financial targets. The report concludes by emphasizing the importance of budget adherence for profitability and provides recommendations for future financial planning and performance enhancement.

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Finance

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Executive summary
In the report, there is the consideration of the budget and its importance for the business. The
main objectives of the budget formulation have been identified. There is the variance analysis
that has been performed and in that, all of the variances which are involved with the level of
activities have been determined. The proper analyzation of them is made and in that it is
determined that the company has undertaken the activities at a lower level and that is the
main cause of adverse results. With that, the profits are also lower and there are various
expenses which are made ta a higher level. They are the points of concern for management.
The manner in which improvement can be made has also been determined in the report that is
presented.

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Table of Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................4
a).................................................................................................................................................4
b)................................................................................................................................................5
c).................................................................................................................................................5
d)................................................................................................................................................6
Conclusion..................................................................................................................................7
References..................................................................................................................................8

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Introduction
Budgeting is an important process that is required to be followed in all the businesses and
under this various aspect of the business is planned. There is the estimation which is made for
the amount of expenses and incomes which will be made in the coming period. The actual
and budgeted performance is to be compared so that the performance can be evaluated and
for that variances are calculated in an effective manner.
a)
Budget is the plan which is prepared to ascertain the costs and incomes in relation to the
coming period. Businesses undertake the same for various purposes and objectives which are
to be attained. In a similar manner, there are various objectives for which Twin rivers café
has prepared the budgets. The main objective is to provide the members with the guidelines
which need to be followed (Raghunandan, Ramgulam and Raghunandan-Mohammed, 2012).
With the help of this, the direction in which the actions are to be taken will be identified and
will help the café in attaining the best results.
Twin River wants to manage all the cash flows appropriately and for that, the budget is
prepared by which the requirement in terms of the cash flow will be identified adequately.
Estimation of cash flows is a difficult task and the budget for the same will be prepared by
considering the past data and trends which are prevailing in the current period. With the help
of the most appropriate budget will be prepared to carry the operations with due care.
With the help of the budget, it will be possible for Twin River to allocate all the available
resources in the most effective manner. There are various activities that need to be performed
and the resources are limited. The budget is made with the objective to have the most
appropriate allocation done (Schick, 2014). In the business, there are many employees who
are working and so is the case with the twin river in which the staff is carrying all the
operations. It is therefore required that their performance shall be evaluated and for that, the
budget has been prepared. With the help of a budget, the parameters will be set and all the
employees will be required to perform accordingly. The café will be able to test the
performance and then make further policies considering the aspects which are determined so
that further improvement in the process can be initiated.

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b)
Variance is the tool to identify the deviations which exist among the business between the
budgeted and actual values that have been ascertained. For this, both budgeted and actual
values are collected and then the difference that is present among them is determined
(Arnhold, 2013). They will be helping in evaluating the performance and it will be
ascertained whether the standards have been maintained or not. The calculation for the same
in the given case is represented below.
Particulars Budget Actual Variance Favourable/unfavourable
Budgeted meals quantity 18000 17800 200 Unfavorable
revenues 81000 80100 900 Unfavourable
Expenses
Raw material 43200 42720 480 Favourable
Wages and salaries 10600 10540 60 Favourable
Utilities 3300 3290 10 Favourable
Facility rent' 4300 5100 -800 Unfavourable
Insurance 2300 2600 -300 Unfavourable
Fuel 2480 2490 -10 Unfavourable
Total expenses 66180 66740 -560 Unfavourable
Net operating income 14820 13360 1460 Unfavourable
All the variances are identified and with that, the favourable and unfavourable nature of them
for the business is also determined (Taieb and Atiya, 2015). There is the adverse profit which
is made by the business in comparison to the profits that have been provided in the budget
prepared by management.
c)
All the activities which are performed in the business are to be carried in an effective manner.
In the given case it can be identified that there is a lower level of activities which have been
undertaken in comparison to the budget. The numbers of meals that have been provided by
the business are less and due to that the revenue variance is derived to be unfavourable and is
less than the budgeted revenue which has been estimated (Althoff et al., 2017). This is an
adverse condition for the business as it will be affecting the final results which are available.
In the undertaking of various activities, there are several expenses that are required to be
incurred and the variance for the same is also taken into account. In the given case also there
are many expenses which are involved and it is identified that in spite of a decrease in the

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quantity the expenses which are made are rising. There are unfavourable variances which
have been identified. The facility rent which is estimated by the café is less than the actual
amount which has been incurred (Bachmann, Elstner and Sims, 2013). The expenses for the
fuel and insurance are also more than budgeted and with that, the total expenses which are
made are higher and that is negative for the business. It is having an adverse impact on the
profitability of the business which is becoming less. The amount of the profits which are
made in the current period are 13360 but the budgeted amount of profit is 14820. This shows
that the net gain of the café is at stake and required to be taken into account.
The excessive expenses which are made are the main activities which are of concern to the
management and they will be required to take them into consideration. If they will be
incurred in the same manner then the business will not be able to attain the required benefits
which will be harmful in the long run (De Clercq, Lim and Oh, 2013). There is the need to
take them into notice and take the required action for the same. The main focus will be made
on the rent expenses as there is the highest variance which is identified in the same. With
that, the level of activities which is less is also a point of concern for the management and
needs to be improved in the coming period.
d)
The main objective of any business is to earn the highest amount of profit by following the
budget which has been prepared. In the given case it has been analyzed that the targets which
have been specified in the budget have not been met and this disadvantage for the business.
There is less level at which the activities are performed. Due to that complete business is
getting affected including the amount of earning which is made. To improve the condition
and attain the objectives and targets which are set there is the need to take the required
actions. The main aspect which will be required to be focused on is the improvement in the
quantity and for that management, improvement will be made (Donate and Canales, 2012).
There will be a proper policy that will be formulated and that will be required to be followed
by all. In that, the targets will be given to all and they will be required to be met by all.
There will be a formulation of the proper guidelines and will be provided to all and will be
required to comply with them in a compulsory manner. With the help of that, the team will be
having an idea as to the process which needs to be followed by them for the successful
completion of tasks. There will be a proper process that will be established for the monitoring

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of the activities. The monitoring will be done in a continuous manner and in that the activities
of all will be tested and also their performance will be evaluated (Shankar et al., 2013). This
will be building the responsibility of the members to attain their targets in a successful
manner. They will be trying to prove their performance and for that will be performing in an
adequate manner.
The expenses which are incurred will have to analyze and there will be a proper system that
will be made and in that the resources will be distributed as per the requirement. There will
be no extra resources which will be paid the team will be asked to manage the activities with
the given targets. By following all of these approaches there will be a proper system and the
objectives which are set by the twin café will be achieved in the most appropriate manner.
Conclusion
The report that is presented above elucidates all the objectives which are there in relation to
the budget formulation. With the help of that proper understanding has been made in relation
to the requirement of the budget in the business. There is the budget and actual performance
which has been compared and in that, all of the variances which are involved have been
determined. It has been identified that there are fewer meals which have been provided by the
café in the given period. The activities which are involved and are of the major concern to the
business have been identified. The manner in which the identified concerns can be resolved
and the set objectives can be met by the business have been identified and discussed.

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References
Althoff, T., Hicks, J.L., King, A.C., Delp, S.L. and Leskovec, J. (2017) Large-scale physical
activity data reveal worldwide activity inequality. Nature, 547(7663), p.336.
Arnhold, E. (2013) Package in the R environment for analysis of variance and
complementary analyses. Brazilian Journal of Veterinary Research and Animal
Science, 50(6), pp.488-492.
Bachmann, R., Elstner, S. and Sims, E.R. (2013) Uncertainty and economic activity:
Evidence from business survey data. American Economic Journal: Macroeconomics, 5(2),
pp.217-49.
De Clercq, D., Lim, D.S. and Oh, C.H. (2013) Individual–level resources and new business
activity: The contingent role of institutional context. Entrepreneurship Theory and
Practice, 37(2), pp.303-330.
Donate, M.J. and Canales, J.I. (2012 A new approach to the concept of knowledge
strategy. Journal of Knowledge Management, 16(1), pp.22-44.
Raghunandan, M., Ramgulam, N. and Raghunandan-Mohammed, K. (2012) Examining the
behavioural aspects of budgeting with particular emphasis on public sector/service
budgets. International Journal of Business and Social Science, 3(14).
Schick, A. (2014) The metamorphoses of performance budgeting. OECD Journal on
Budgeting, 13(2), pp.49-79.
Shankar, B.L., Basavarajappa, S., Chen, J.C. and Kadadevaramath, R.S. (2013) Location and
allocation decisions for multi-echelon supply chain network–A multi-objective evolutionary
approach. Expert Systems with Applications, 40(2), pp.551-562.
Taieb, S.B. and Atiya, A.F. (2015) A bias and variance analysis for multistep-ahead time
series forecasting. IEEE transactions on neural networks and learning systems, 27(1), pp.62-
76.